Function

• An IRA is a tax-advantaged account that allows anyone with earned income to save for retirement. Traditional or regular IRAs are tax-deferred, meaning that you don't pay taxes on the money that goes into a regular IRA. Whatever amount you contribute to your regular IRA is deducted from your income on your tax returns for that year. The money then grows tax-free until you decide to withdraw it, at which point it will be taxed as income.
  
  

Features

• Regular IRAs have income and contribution limits. The contribution limit for a regular IRA is currently $5000, and that limit will rise in $500 increments (indexed for inflation) starting in 2009. If you are also eligible for an employer-sponsored plan like a 401(k), the tax advantage of a regular IRA is phased out according to your income. If you make more than $53,000 as a single filer or more than $85,000 as a couple, your regular IRA contribution will only be partially tax-deductible. If you make more than $63,000 as a single filer or more than $105,000 as a couple, your regular IRA contribution will not be tax-deductible at all. However, if you are not covered by an employer-sponsored plan, there are no income limits on a regular IRA account.
  
  

Benefits

• Regular IRAs are great for people who believe that they are currently in a higher tax bracket than they will be at retirement. They are a good way to save money on current-year taxes.
  
  

Benefits

• Those who are not eligible for a Roth or other type of IRA should consider a regular IRA. The more lenient income limits mean that regular IRAs are generally more accessible.
  
  

Considerations

• If you believe that you are in a lower tax bracket now than you will be at retirement, the regular IRA may not be the right choice for you. Also, since they have the same tax treatment as a 401(k), if you already have a 401(k), a Roth IRA might be the better choice, so that you have different tax treatment among your various retirement accounts.