Individual retirement accounts are sort of like savings accounts. They are designed so that taxpayers can save up money for retirement. They also allow taxpayer participants to receive huge tax breaks. A common misconception is that an IRA is very similar to an investment of stock. However unlike in an investment, an individual who owns an IRA will reap the rewards later on in life. For example, dividends can be received at the end of a fiscal year. But the benefits of an IRA come into effect after the individual reaches the age of 59 ½.
There are four common Individual Retirement Accounts (IRA):
1- Deductible IRA
2- Non-Deductible IRA
3- Roth IRA
4- Coverdell Educations Savings Account (IRA)