An IRA (individual retirement account) is set up by a financial institution, allowing individuals to save for retirement and take advantage of tax-free or tax-deferred growth.
Traditional IRA: You make contributions with income before it is taxed, and plan to pay taxes at a lower income bracket compared to when you withdraw. Your balance grows tax-free, and you only pay taxes when you withdraw at retirement.
Roth IRA: You make contributions with post-tax income. Your balance grows tax-free, and you pay no taxes at the time of withdrawal as long as you follow account guidelines.