IRA stands for Individual Retirement Account, a special savings plan that helps people in the United States set aside money for retirement while enjoying certain tax benefits.
Most workers open an IRA through a bank or investment app, add a bit of money each month, and watch it grow until they retire. You’ll hear friends say things like, “I just moved my old 401(k) into an IRA” or “I maxed out my IRA contribution this year,” meaning they put in the highest amount the IRS allows.
Meaning & Usage Examples
• “I rolled over my 401(k) into a traditional IRA.”
• “She contributes $6,500 a year to her Roth IRA.”
• “We opened a spousal IRA for my partner who isn’t working right now.”
Context / Common Use
People usually open an IRA if their job doesn’t offer a 401(k) or if they want extra retirement savings beyond what their employer provides. The two main types—traditional IRA and Roth IRA—differ in when you pay taxes: traditional gives you a tax break now, while Roth gives tax-free withdrawals later.
How much can I put in an IRA each year?
For 2024, the limit is $7,000 if you’re under 50, or $8,000 if you’re 50 or older.
Can I open an IRA if I already have a 401(k)?
Yes. Having a 401(k) at work doesn’t stop you; it only affects whether your traditional IRA contributions are tax-deductible.
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