In U.S. retirement planning, what does the abbreviation IRA stand for?

In U.S. retirement planning, IRA stands for individual retirement account.

An IRA is a tax-advantaged account used to save or invest for retirement. Depending on the type of IRA and the circumstances, contributions may receive a tax deduction, or qualified withdrawals may receive tax-free treatment. Traditional IRAs and Roth IRAs are the two best-known forms, but they have different tax rules.

A traditional IRA generally uses pre-tax contributions or contributions that may be deductible, with taxes commonly due when money is withdrawn. A Roth IRA uses after-tax contributions, and qualified withdrawals can be tax-free. Contribution eligibility, deduction rules, income limits, and withdrawal penalties depend on U.S. tax law and can change.

IRAs are not the same as employer-sponsored plans such as 401(k)s. An IRA is typically opened by an individual with a financial institution, while a 401(k) is arranged through an employer. The term IRA became part of U.S. retirement policy through the Employee Retirement Income Security Act of 1974.