Individual Retirement Accounts (IRAs) and annuities both provide the opportunity to grow money on a tax-deferred basis, but there are differences between the two. An IRA can be thought of as an individual savings account with tax benefits. You open an IRA for yourself (that’s why it’s called an individual retirement account) and if you have a spouse, you’ll have to open separate accounts. An important distinction to make is that an IRA is not an investment itself; rather, it is an account where you keep investments such as stocks, bonds and mutual funds. You get to choose the investments in the account, and can change the investments if you wish. Your return depends on the performance of the investments held in the IRA. An IRA continues to accumulate contributions and interest until you reach retirement age, meaning you could have an IRA for decades before making any withdrawals.
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