Hi everyone and welcome back to Money Girls Quick and Dirty Tips for a richer life.

I'm your host Laura Adams. I'm a big fan of the IRA or individual retirement arrangement

when it comes to saving for retirement. But I found that many people are unclear about IRAs. They aren't sure who can have one or how an IRA really works. If you're a more experienced investor, you may know the answer to those questions, but still be uncertain about whether a traditional or a

Roth IRA is right for you. I'll help you with the answers to those questions in this and the

next show. Okay let's start with the basics. A fundamental concept to understand about an IRA, or any retirement

account for that matter, is that it's not an investment. An IRA is an account for your investments.

Think of it like your house or apartment.

It's a shelter that protects you, but it's not you.

In a similar way, an IRA is also a shelter that protects your investments while they're owned inside the account.

You can put just about any investment in an IRA, such as stocks, bonds, exchange-traded funds, mutual funds, and CDs.

There are even special kinds of accounts called self-directed IRAs that allow you to invest directly in less mainstream investments like real estate and businesses.

But I'm just going to focus on traditional and Roth IRAs here.

A traditional IRA is available to anyone who's younger than age 70 and a half and has earned income.

Earned income could come from your job, business, taxable alimony receipts, or even from

your spouse if you're married and don't work.

For 2010, you can contribute an amount equal to your earned income

up to $5,000.

However, if you're age 50 or older,

you can make an additional catch-up contribution of 1,000 for a total of 6,000.

If you or a spouse don't have a retirement plan at work, like a 401k or a 403b,

you can deduct all of your IRA contributions from your income.

That means you don't pay tax on the amount you contribute

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