Types

You can choose to start a traditional IRA or Roth IRA, regardless of your employment situation. Many other retirement accounts, such as 401(k) and 403(b) plans, require that you to contribute through your employer.

Traditional IRA

Contributions you make to your traditional IRA are tax deductible as an adjustment to income, also known as an above-the-line deduction. This means that you can take the tax deduction without sacrificing the standard deduction. Any money in your traditional IRA grows tax-free until you withdraw it at retirement.

Roth IRA

Roth IRAs do not offer a tax deduction for contributions. However, the money still grows tax-free and you can take distributions tax-free at retirement.

Investment Options

When you invest in a 401(k), 403(b) or other employer-sponsored retirement plan, you are restricted to the options offered by the company. With an IRA, the only restriction on your options is an IRS prohibition on using IRA funds to invest in collectibles, such as cars or rugs.

Considerations

You cannot open a traditional IRA unless you are under age 70 1/2. You cannot contribute to a Roth IRA unless your adjusted gross income is below the threshold for your filing status for that year. The limits adjust annually for inflation and can be found on the IRS website.

Source:

Internal Revenue Service: Traditional IRA Rules

Internal Revenue Service: Roth IRA Rules

More Information:

IRS: 2010 IRA Contribution and Deduction Limits