There are a lot of ways to save for retirement. Some are employer-sponsored, like 401Ks, while others are available to folks in any employment situation. One of those is an IRA, or individual retirement account. This type of personal savings account can help you put away money for retirement by investing in various stocks, bonds, mutual funds and other assets.

And even if you’re already making healthy contributions to a 401K, an IRA can help you further diversify your retirement savings, including setting aside after-tax dollars. Let’s take a look at some of the basics of IRAs, including the different types of IRAs and how they can help you prepare for your post-career life, whether you’re just beginning your career or approaching retirement.

What Is an IRA?

IRAs were started in 1974 and grew increasingly popular as pensions declined and individuals became more responsible for managing their own retirement. IRAs can help you save and grow your retirement funds for a better quality of life in your golden years. That might make it sound a lot like a 401K, but …

Is An IRA the Same as a 401K?

No, an IRA can supplement your 401K by widening your range of investment options and could even act as a replacement if you don’t have access to a 401K. The primary difference is that a 401K is always sponsored by your employer. And while they can also offer IRAs as a benefit, individuals can open them. Let’s take a look at the different IRA options.

What Are the Different Types of IRAs?

There are many types of IRAs, each with their own set of features and advantages.

1. Traditional IRA: Contributions to a traditional IRA are either partially or fully deductible from your taxable income — in other words, you won’t pay taxes until you withdraw your funds in retirement. Once you reach age 70½, you can no longer contribute to a traditional IRA and you’re required to start taking at least the minimum distribution. There is a contribution limit of $5,500 per year up until that age.
2. Roth IRA: Roth IRA contributions are made after taxes. Your money can then grow tax-free and you won’t pay anything upon withdrawal. Not everyone can participate in an IRA, as there are income restrictions. You can contribute to an IRA as long as you have earned income, and you can leave your money untouched as long as you wish. There is a contribution limit of $5,500 per year.
3. Simplified Employee Pension (SEP) IRA: An SEP IRA is a form of the traditional IRA for small business owners and the self-employed. Business owners and freelancers can open SEP IRAs. Contributions are tax deductible, so taxes aren’t paid until withdrawal. The contribution limits are much higher — for 2017, the limit is $54,000, or 25% of income, whichever is smaller.
4. Savings Incentive Match Plan for Employees (SIMPLE) IRA: A SIMPLE IRA is a form of traditional IRA for small businesses and the self-employed. Contributions are tax-deductible, so taxes aren’t paid until withdrawal. With the SIMPLE IRA, employees can make contributions and the employer must make a matching contribution, up to 3% of salary. These plans also have higher contribution limits and are easier to set up than other employer-sponsored retirement plans.

With some exceptions, withdrawing early (before you turn 59½) from all four types of the plans results in a 10% tax penalty.

So What’s an IRA Savings Account?

It’s just another term for an IRA.

How Do I Set Up an IRA?

First, you’ll need to decide which type of IRA is right for you. You can open an IRA through most financial institutions, including banks, mutual fund companies and investment firms. An adviser through one of these institutions can help choose your investments and you can start contributing. The fee structure can differ depending on who’s managing your IRA and what kind of financial instruments it is tied to, so pay attention to the cost when you’re evaluating plans. In the meantime, you can keep tabs on your overall finances by viewing your free credit report snapshot on Credit.com.