An IRA is a tax-sheltered retirement account for individuals. For certain people, it can be an excellent way to save for retirement because, when used correctly, it can help you pay less taxes on the money you invest in them. It may be used instead of, or in addition to, another pension or retirement plan you have, to increase your retirement savings. It is especially useful to customers who are not covered under a retirement plan where they work. It may also be used by parents as a college savings plan.

There are three types of IRAs:

• Traditional IRA: This IRA account lets you invest and grow pre-tax dollars, and withdraw them at retirement, at which time you pay taxes on both the principal and earnings. The purpose of this account is to enable you to delay (defer) paying taxes on your investment from now (when your tax bracket is high) to retirement (when your tax bracket is low)—thus reducing your taxes. If your tax bracket will not be lower at retirement than now, this IRA will not reduce your taxes. If you will need this money before retirement, this is also not for you, since there is a substantial penalty for early withdrawal. There are many rules and restrictions, you may want to consult a tax advisor.
• Roth IRA: This account lets you invest after-tax money, which then grows tax-deferred until retirement. (It allows tax-free withdrawals for certain distribution reasons after a five-year holding period.) Roth IRAs make particularly good sense if you expect to be in a HIGHER tax bracket when you retire than you are now when you make your investments. Like all IRAs, there is a substantial penalty for early withdrawal.
• Education IRA: (Not offered at all locations. Ask your branch manager for more details.) Education IRAs allow you to save money for future education expenses of a designated beneficiary, usually a child or grandchild.