Types

• There are essentially only two types of IRAs from which to choose. One is called a Roth IRA, and it's for people who think their income tax rates will be higher upon retirement. While their contributions to a Roth IRA are not deductible, the account grows tax-free and whatever they take out is free of tax, as well. A traditional IRA is for those who believe their income tax rates will go down upon retirement. Their withdrawals at retirement are taxed, presumably at a lower rate, but their contributions, up to certain limits, are tax-deductible.
  
  

Considerations

• There are three places where you can open your IRA. The easiest place to start is by opening an IRA account at a bank, if for no better reason than to make sure you get your deduction. Banks pay traditionally low rates, but you can easily transfer your money to a traditional or online broker or to a mutual fund company later. Essentially, you can invest IRA balances in any kind of securities like stocks, bonds, mutual funds, and others. You can even invest IRAs in real estate, but there are restrictions.
  
  

Features

• Some financial institutions require you to make a minimum initial investment of $1,000, or more, while others are much less. Also, keep track of your costs. For example, if you are investing in mutual funds, find those that have no sales charges. Also, it is worthwhile to compare the ongoing management expenses among mutual funds. The average is about 1.5 percent, but lower ones are available if you take the time to look.
  
  

Effects

• If you have chosen to invest your IRA in mutual funds, many of them allow you to set up your account online. In addition, they will offer to withdraw an amount monthly from your checking account. Finally, if you set up an account at a website of a mutual fund that sells its shares on a no-load basis, you will substantially reduce your costs.
  
  

Potential

• Many companies are assuming less responsibility for the retirement of their workers. For that reason, employees will be called upon to shoulder more of that responsibility by creating retirement accounts themselves. Since IRA's are so easy to establish, and the amount that an employee can contribute each year has risen so dramatically.