IRAs are tax advantaged retirement accounts that allow individuals to contribute earned wages (from a job) up to a maximum annual limit. An IRA can be used to invest in a variety of investments, including individual stocks and bonds, mutual funds, and money market funds. IRAs are offered through most financial institutions.

The maximum annual IRA contribution limit for 2005 through 2007 is $4,000 per year. In 2008 and beyond the maximum IRA contribution is $5,000 per year.

In addition, those over age 50 before the end of the taxable year with earned income can contribute $1000 more then the regular limits outlined above. Note that the over-50 bonus amount is not indexed to inflation.

IRA contributions can be made up until April 15th of the following year. The contribution does not have to be made all at once. Many people find it easier to have an amount (i.e. $333 per month) automatically withdrawn from a commonly used financial account (i.e. checking, savings, or money market account) into their IRA. The financial institution where the IRA is held can arrange an automatic investment plan.