Anyone who is employed or self-employed can open an individual retirement
account (IRA) and contribute up to $3,000 a year. Depending on your
individual circumstances, you may be able to deduct part or all of your
IRA contributions on your federal income-tax return. All investment
earnings in your IRA compound on a tax-deferred basis. You pay tax on
your earnings and any deductible contributions when you withdraw the
money from your account. Any withdrawals you make before age 59 1/2
may be subject to a 10% early withdrawal penalty in addition to income
tax.