The best way to explain what an IRA is to just answer questions about it. Let's get started.

Q. What does an IRA stand for?
A. IRA Stands for Individual Retirement Arrangement. Most people (even some (financial experts) Call it Individual Retirement Account. But the legal name is actually Individual Retirement Arrangement. But as we will see later on an IRA can be used for other purposes other than retirement.

Q. What exactly is an IRA?
A. In a nutshell, an IRA is a government sponsored pension plan with tax advantages.(The paragraph below will go more into detail)

Q. How long have IRAs existed?
A. IRAs have been around since 1974 with the the enactment of the Employee Retirement Income and Security Act (ERISA). Congress created them to give Americans incentives to save for retirement.

Q. So who keeps my money?
A. That is up to you. Most people think that they can only open an IRA through a traditional financial institutions (Banks, brokers, etc.) but as we will soon see there are a host of options that many of us tax payers simply do not know about.

Q. So anyone can contribute to an IRA?
A. No. You must have taxable compensation. This includes things like salary, wages, self-employed earnings from your business, and alimony. There are also income limits.

In a nustshell that tells you all the preliminary information you need to know about an IRA. Depending on who you ask you will get different answers. Most financial institutions and experts will tell you that an IRA is a retirement account that allows you to grow your money tax free or provides tax advantages. This is only 25% or less of what an IRA is about. Make sure to check out the FAQ section that will answer many of the questions that you may still have.

The rules for an IRA has changed over the years. It started out as a way for taxpayers to have a retirement plan that were not covered by one at thie job. The Economic Recovery Tax Act of 1981 allowed all taxpayers to contribute to an IRA. Since 1974 all contributions to an IRA were tax-deductible. The Tax Reform Act of 1986 allowed deductible contributions only by an individual who was not covered by an employer pension plan, and who had adjusted gross income under and $35,000 ($50,000 for joint filers). The Taxpayer Relief Act of 1997 raised the income limits for deductible contributions to tax payers who had adjusted gross income under $30,000 ($50,000 for joint filers). The 1997 relief act also introduced the Roth IRA, which as we will see shortly can be a real benefit.

Now that you have the basics, you are ready to move on to the nest level. Whether you THINK you have little to no money to invest in an IRA, I guarantee that you should be taking advantages of your IRA.