An individual retirement account (IRA) allows workers with taxable compensation to make annual contributions to a retirement plan up to certain limits and receive favorable income-tax treatment of such contributions. There are two basic types of IRA plans:
A traditional IRA is an IRA that allows workers to take a tax deduction for part or all of their IRA contributions. The investment income accumulates income-tax free on a tax-deferred basis, and the distributions are taxed as ordinary income.
There are two eligibility requirements for establishing a traditional tax-deductible IRA. First, the participant must have taxable compensation during the year ...