Traditional Individual Retirement Accounts, called Traditional IRAs (or often just IRAs for short), are retirement plans that you can set up on your own, whether or not you participate in other, employer-sponsored retirement accounts.

How Traditional IRAs Work

Unlike 401(k)s ^[2], 403(b)s ^[3], and 457(b)s ^[3], traditional IRAs are retirement accounts that you set up directly with a bank, a financial services firm, or an online brokerage. Even though you’re not tied to an employer with IRAs, they do have various contribution limits based on your annual income. Here’s a quick breakdown of how they work:

You set up an IRA account: The setup process usually involves filling out a few simple forms and providing an initial deposit of $500–1,000, though some IRAs have initial deposit requirements of $25 or less. I set mine up with Scottrade ^[4].

You make contributions: You can contribute to your account at any time during the year up to the allowable limit and before the annual contribution deadline. Certain contributions can be tax-deductible, though restrictions apply (see Key Traits of Traditional IRAs below).
Your investments will grow tax-deferred which means that you don’t pay taxes on investment gains until you withdraw your assets, either after age 59 1/2 or for other qualified exceptions.