What are the restriction of an IRA account?

An Individual Retirement Account (IRA) has several key restrictions, including annual contribution limits, which for 2023 are $6,500 (or $7,500 for those aged 50 and over). Additionally, withdrawals before age 59½ typically incur a 10% penalty, along with applicable income taxes. IRAs also have income limits that may restrict the ability to contribute or deduct contributions, particularly for Roth IRAs. Lastly, the funds must be used for retirement purposes, with limited exceptions for certain circumstances like first-time home purchases or qualified education expenses.