An Individual Retirement Account (IRA) or is a great way to build wealth by having your money grow tax free. There are several IRA options available including: Traditional IRAs, Roth IRAs, and Traditional Non-Deductible IRAs. To be eligible to contribute to any type of IRA, you must have earned income either as an employee or self-employed individual.

A Traditional IRA is a tax-deferred investment account. If you have earned income and are under age 70 1/2, then you are eligible to make annual contributions to a Traditional IRA. This contribution may be up to $5,000 for 2008 and 2009. If you are over age 50, you can make a contribution up to $6000 for 2008 and 2009. These contributions may be partially or fully tax deductible depending on your participation in another retirement plan and current income.

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Like Traditional IRAs, a Roth IRA has the same dollar contribution limits and is a tax-sheltered investment account. The major difference is that your contributions to a Roth IRA are not tax deductible, but your earnings are allowed to grow tax free and your qualified withdrawals are also tax free.

For most people, a Roth IRA is the best option, however, it can make sense to opt for a Traditional IRA if you need the tax deduction now or you expect to be in a much lower tax bracket in retirement.

If your income prohibits you from making contributions to a Traditional or Roth IRA, another option is a Traditional Non-Deductible IRA. While the tax benefits are not nearly as great as other IRAs, you still have the advantage of tax-deferred growth, which is significant.

Sophisticated entrepreneurs or investors may also set up any of these accounts as self-directed IRAs and invest in privately held businesses, real estate transactions, options on stock, and other non-traditional investments. For these experienced and skilled entrepreneurs and investors, a self-directed IRA can be great way to access start-up or expansion capital and build wealth tax-free. Keep in mind, any such speculative investments should be done with a small portion of your portfolio, under the guidance of experts, and using BARON strategies for minimizing investment risk.

Remember, if you are unable to make a lump sum contributions to your IRA, you can always set up an automatic investment plan which will make regular withdrawals from your checking or saving account. By using these tax deferred accounts and the BARON How to Become a Millionaire table as a guide, you will quickly see, that a million-dollar retirement is not only possible, but easily within your reach.

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