An Individual Retirement Account (IRA)

An Individual Retirement Account (IRA) is a type of savings account that is used by individuals to plan for their retirement later in life. There are two types of IRAs: Traditional IRA and Roth IRA. The biggest difference between a Traditional IRA and a Roth IRA is that Required Minimum Distributions (RMDs) do not apply to Roth IRAs. Generally, early withdrawal from an IRA prior to the age of 59 1⁄2 is subject to a 10% penalty unless the individual meets an exception defined under the plan.