How does an IRA work?

Eligible individuals can make annual contributions into an IRA account, some of which may be treated on a pre-tax basis and therefore tax-deductible on the individual’s annual tax returns. The funds within the IRA grow on a tax deferred basis. Funds withdrawn from the IRA after the age of 59 ½ are fully taxable, including any and all taxable gains. At the age of 70 ½, funds within an IRA account are subject to the required minimum distribution requirements (RMDs) as set out by the IRS.