Individual retirement accounts are tax-deferred retirement accounts for individual that allow them to set aside a set amount per year, with earnings tax-deferred until withdrawals begin at age 59 1/2 or later (earlier, with a 10% penalty). IRAs can be established at a bank, mutual fund, or brokerage firm. Only those who do not participate in a pension plan at work or who do participate and meet certain income guidelines can make deductible contributions to an IRA. All others can make contributions to an IRA on a non-deductible basis. Such contributions qualify as a deduction against income earned in that year and interest accumulates tax-deferred until the funds are withdrawn. A participant is able to roll over a distribution to another IRA. They are also able to withdraw funds without penalty using a special schedule of early payments made over the participant's life expectancy: this is referred to as a 72t distribution.

From the participants prospective, 401ks, IRA’s and all qualified retirement accounts are wonderful tools for growth during the accumulation phase of money. Careful planning is necessary when using these funds for a majority of one’s retirement assets due to the possible challenges of these accounts during the distribution and preservation phases of money. For example: If the tax structure should increase in future years then tax distributions would be at a higher rate than when contributions were made. This would create a reverse tax strategy.