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From the Mint team: Take the first step to finding the right IRA for you by visiting Mint’s IRA information page. Post navigation Admit it. You’re curious about individual retirement accounts or IRAs. You know they can help you save for your future. Still, they’re a little confusing at times.I know because I receive many questions about IRAs on my podcast each week and I suspect I’ll hear more, as the freelance economy expands and workers look to alternative ways to save for retirement beyond traditional 401(k)s offered by employers.Here are some frequently asked questions and answers about IRAs. And if you’re still left scratching your head, leave me questions in the comments section below.Q: What is an IRA, really?A: Very simply, an individual retirement account or IRA is an investment account designed to help workers sock away some of their earned income for retirement. Earned income is defined as wages, salaries, tips and other kinds of claimed taxable income produced while working for someone else or yourself.Q: How does my money get invested in an IRA?A: You can choose to invest your money in a variety of ways – cash, stocks, CDs, bonds, mutual funds, exchange-traded funds, index funds, etc.Q: There are two types, right? What are the similarities and differences?A: The traditional and Roth are the most popular types of IRA accounts (more on some other IRA versions in a moment). The biggest difference is the tax advantage each provides.Contributions made today to a traditional IRA are tax-deductible, thus helping you to reduce your taxable income. Future withdrawals are then subject to income tax. Anyone can contribute to a traditional IRA, regardless of how much they earn. You can begin withdrawing money at age 59 1/2 without penalty. Before that age, the IRS will charge you a 10% early withdrawal penalty and you must pay income tax on that withdrawal at your current tax rate. For the 2017 tax year, you can contribute up to $5,500 in a traditional IRA. If you are 50 or older, you can make an extra “catch-up” contribution of $1,000.Contributions to a Roth IRA, meantime, are not tax-deductible. Instead, you can withdraw from the account tax-free beginning at age 59 1/2 (as long as it’s been at least five years since your first contribution). Like a traditional IRA, you can contribute up to $5,500 in a Roth. If you are 50 or older, you can make an extra “catch-up” contribution of $1,000. There are income limitations to qualify, however. If you are married and filing taxes jointly, the IRS says you can fully contribute to a Roth IRA, as long as your adjusted gross income is no more than $186,000. Single filers must earn less than $118,000 to contribute up to the limit.Another notable difference between a traditional and Roth IRA is that contributions to a Roth IRA can be withdrawn penalty-free at any time, once the account’s been open for five years. If, however, you dip into your earnings before 59 1/2 years old that money is then subject to income taxes and a 10% early withdrawal penalty.Q: Which is better for me? A Roth or Traditional IRA?A: If you expect to be in a lower tax bracket in retirement, then a traditional IRA may be best. Of course, if you earn more than the Roth’s income limit, you’re only choice between the two is the traditional IRA.If you already have a 401(k) or other type of employer-sponsored retirement account where contributions are tax-deductible – and you’re looking to diversify your tax exposure in retirement – a Roth IRA can be a better vehicle for that purpose.Finally, if you desire more financial liquidity in your life, then a Roth IRA may be a wiser choice. You can, as stated earlier, withdraw your contributions penalty-free at any time from a Roth IRA (once you’ve established the account for 5 years).Q: Are there age restrictions to opening an IRA?A: There is no minimum age limit to contribute to a Roth IRA, but you must be younger than 70 1/2 to open a traditional IRA.Q: How can I open up an account? Does it cost anything to open an IRA?A: You can open an account at any number of financial institutions. You can transfer money from a current bank account or existing IRA or by rolling over money from a 401(k) from a previous employer.Q: IRA versus 401(k): Which one is better?A: In general, the ideal retirement savings vehicle is an employer-sponsored account like a 401(k) that provides a match. That’s more or less free money. If you’re already putting the maximum towards your 401(k) and receiving a company match – and want to continue to invest – then an IRA can be the next best vehicle. For 2017, you can defer as much as $18,000 of your paycheck to your 401(k). If you’re 50 or older, you can contribute an additional $6,000.Q: There are some other types of IRAs, too, right?A: Yes, for individual business owners, there is the SEP IRA (SEP stands for Simplified Employee Pension). The SEP lets business owners contribute to their retirement, as well as the retirement of their employees. SEP-IRA’s generally follow the same guidelines as traditional IRAs. One big difference: You can contribute up to 25% of your compensation or $54,000 in 2017, a much larger amount than with traditional IRAs.There’s also another category called self-directed IRAs. Unlike traditional IRAs that limit investors to mainly stocks, funds and bonds, this alternative account allows for a more creative, broader range of assets including real estate, private equity, foreign companies, precious metals, even race horses. Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at [email protected] (please note “Mint Blog” in the subject line).Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend. 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