Here's how they work. Think of an IRA as a basket. Once you have one, you pick investments to put in it—mutual funds, stocks, bonds, CDs, and annuities. Because they're in the IRA "basket," they're protected from some taxes. And that adds up to the potential to earn more money.

Traditional IRA: The contributions you make may be tax deductible. So instead of paying taxes now, you'll pay taxes on the money your IRA earns when you withdraw it. If you're in a lower tax bracket at that point, you'll pay taxes at a lower marginal income tax rate.

Roth IRA: You pay taxes now so that you don't have to pay tax on any of the profits earned between now and when you start withdrawing the money.

Rollover IRA: This type of IRA is a simple solution if you've got a 401(k) or other retirement plan from a past job, and you want to move the money without paying penalties. This is especially helpful if you have several 401(k)s. It gives you more options for how to invest your money, and helps keep things simple by consolidating them into one account.

There are also IRAs for self-employed people, small-business owners, and non-working people whose spouses contribute on their behalf.

• They can help you pay lower taxes—either now or during retirement.
• You invest in financial products such as mutual funds or variable annuities, which are managed by professionals.
• There are several types of IRA, so you can pick the one that's best for you. (Some have eligibility requirements that you'll need to keep in mind.)
• People 50 and older can contribute extra money to their IRA each year to help them "catch up" on their retirement savings.
• You can start withdrawing money without tax penalties even while you're still working (once you're 59½).

• Those who are ready to set aside money and not touch it until they retire
• People who would like to potentially pay less income tax
• People who want lots of choices for investing their money—such as mutual funds, stocks, bonds, CDs, or annuities