An IRA [Individual Retirement Account] is a tax code that the IRS has established for savings and investing toward retirement. You may be able to contribute to an IRA if you do not have an employer sponsored retirement plan, and if you do not make too much income.

If you are eligible to contribute to a deductible Traditional IRA, then all the money that you put into it will be deductible against your income when you go to file taxes for that year's income. You have until April 15th of the following year to put money in for the previous year. Hence, you have until April 15th, 2010 to put money into a deductible Traditional IRA for tax year 2009. It may help to lower your taxes by lowering your taxable income.

There are also Roth IRAs that you can do, which will not lower your income this year, but will grow to be tax free dollars for your future, if it is handled correctly.

With all IRAs, there is a limit to how much you can contribute each year, as well, so keep that in mind when doing one or both of these types of IRAs.

The growth on the IRA will be dependant upon what investment you have inside of the IRA. You can invest in many different types of options within the IRA, so make certain you are looking at all the choices.

The two most commonly used are a Traditional IRA and a ROTH IRA. You establish these accounts for retirement and get some great tax benefits for doing so. Here are the basics of both:

First some common themes between the two:

You can contribute up to $5,000 ($6,000 if you are over 50)
You can begin withdrawals penalty free at 59 1/2
You must have earned income (W-2) to contribute and you cannot exceed the earned income amount for your contribution.

Some specifics on a Traditional IRA:

You can always make a contribution to a Traditional IRA. However, you start to lose the ability to deduct your contribution if you made more than $89,000 filing joint or $55,000 filing single or head of household for 2009. If you contribute to a work retirement program then you may also lose the tax deduction.
You will be required to start taking money out at age 70 1/2.

Now for the ROTH IRA

You do not receive a tax deduction for your contribution. However, the growth of your money is tax free and you withdraw tax-free after 59 1/2. Your ability to contribute declines after $167,000 for joint filers and after $105,000 for single and head of household.

A couple of other notables about the ROTH:
You are never required to take it out.
Your contributions can be withdrawn anytime without penalty.

What about the investment itself?

Your investments in either type grows tax-deferred. It is very flexible. You can invest in stocks, bonds, mutual funds, CDs, annuities, etc. The one thing you cannot use the funds for is to purchase life insurance.

If you have both, you should generally make your ROTH the more aggressive (i.e. riskier) investment. This is because it grows tax free and the more you can grow it, the bigger your tax-free benefit.

Just about any bank/brokerage/insurance company can establish these for you. Talk to a financial advisor to determine the best one for you.