Which statements are true regarding an individual retirement account (IRA)? Select all that apply.

The correct understanding of an Individual Retirement Account (IRA) encompasses several aspects of how it functions. While it's important to recognize that individuals can contribute to an IRA until they reach retirement age, this statement only partially captures the full nature of IRAs.

One essential point is that contributions to an IRA are indeed limited each year. The IRS sets annual contribution limits, which can vary depending on factors like age and the type of IRA (Traditional or Roth). This regulation ensures that contributions align with IRS guidelines for tax-advantaged retirement savings.

Another significant aspect is that contributions to traditional IRAs can often be deducted from federal taxes, depending on the individual's income and other factors. This represents a critical incentive for many taxpayers, as it can reduce taxable income in the year of the contribution.

Lastly, withdrawals from IRAs are typically taxed as ordinary income once the account holder begins taking distributions in retirement, making the understanding of taxation in the retirement phase an important element in managing retirement finances.

In summary, while the ability to contribute until retirement age is accurate, a comprehensive understanding of IRAs includes recognizing annual contribution limits, tax deductions on contributions, and the taxation of withdrawals during retirement.