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Individual Retirement Accounts are tax-advantaged accounts that individuals, not employers, fund to increase their personal retirement savings. These accounts are opened by the you, the individual, either personally or with the assistance of a financial advisor, and are not tied to employment at a certain institution. These accounts allow an individual to save for retirement with tax-free growth or on a tax-deferred basis, and these individuals are eligible to open an IRA if they earn taxable income annually. An IRA is a retirement investing tool for employed individuals that allows an annual contribution of 100% of earned income up to $6,000, or $7,000 for those 50 and older (Kaplan Financial Education).
**This table shows a simplified overview of the difference between the two types of IRA's. There are guidelines and rules that have to be met**
Source: Smart Financial Strategies