Individual Retirement Account (IRA) Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Individual Retirement Account (IRA), written in plain English, along with examples of how it is used.

What is Individual Retirement Account (IRA)?

“A personal savings plan that provides tax advantages to save and invest for retirement. Depending upon individual circumstances such as participation in employee-sponsored plans such as a 401(k) plan, contributions can be tax-deductible. Until the earnings are withdrawn, a traditional IRA will not be taxed. In a Roth IRA, withdrawals are tax-free as long as the requirements are met. Tax penalties may be incurred for funds withdrawn before age 59 1/2. An individual’s IRA contributions cannot exceed $3000 (as of tax year 2004).