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An IRA is an Individual Retirement account that allows individuals to make annual contributions without taxation until the age of 59 . Detailed information on IRA's can be found in the Internal Revenue Services publications 575 and 590. After this age, withdrawals can be made from the IRA without early withdrawal penalty. Several types of IRA's exist, each with different rules and requirements. There are several steps that one can take to effectively establish, contribute to, and benefit from an IRA. This article will present a guideline by which and IRA can be set up.

I: Decide if an IRA is the Right Retirement Instrument:

Since there are several ways to save for retirement and hedge against taxes, a choice exists as to how one should go about planning for retirement and what investment vehicle(s) to choose. Individual Retirement Accounts can be used in conjunction with other retirement instruments but there is an annual limit to the amount an individual can contribute to an IRA.

Questions to consider when deciding to open an IRA can include how much excess money one has to contribute, what kind of percentage return on Investment to expect, and if the money deposited into the IRA will be needed before retirement. The answers to these and other questions can help one know whether an IRA is practical, feasible and profitable in terms of one's retirement goals.

II: Differentiate between Types of IRA and determine Qualification:

When thinking about whether or not an IRA may be a good choice it may be a good idea to become familiar with the various types of IRA, if one qualifies to set up an IRA and what the benefits and advantages of different IRA's are. Some IRA's do not allow any early withdrawals whereas others such as the Roth IRA allow withdrawal of money earned on the original investment without penalty. However, unlike regular IRA's, Roth IRA's are not tax deductible but may qualify for a retirement tax credit.

Additional factors that determine whether or not one qualifies for an IRA include annual income, employment status, tax filing status and pre-existence of an IRA in one's name. Generally, to be able to contribute to an IRA, one's income must not be higher than $116K per year if single or $169K if married. One may also not intend to spend the money in an IRA or be very young in which case a Stretch IRA or Children's IRA may be more practical. Distinguishing and ascertaining which IRA is most suitable, may also be assisted by a representative from the financial

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