An IRA is an Individual Retirement Account.In this type of account, the money you contribute can be deducted from your taxable income. So if you make $50,000 per year and contribute $2,000 to an IRA, your taxable income is only $48,000. The earnings on your contribution are tax deferred, menaing if you contribute $2,000 and it grows to $2,500 you do not pay capital gains taxes. You only pay taxes when you withdraw the money. Withdrawals generally are not allowed until you reach age 59 1/2. There are some exceptions. If you do withdraw prior to this, you will pay regualr tax plus a 10% penalty. Money in an IRA con be invested in anything you wish. Stocks, Bonds, Mutual Funds, CDs, etc.Mutual funds are an investment option for people who don't want to invest in a single stock or bond. ou get diversification because a mutual fund owns hundreds of stocks in its portfolio. Search the FOOL web site for much more detailed information on IRAs and Mutual fundsGood luckBill
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