Young people thinking about Individual Retirement Accounts should think twice. These accounts are wonderful vehicles for retirement savings. But you cannot get that money easily, for things like house payments or college tuition.

There are severe penalties for withdrawing from IRAs before age 59 1/2. Start an IRA if you can, but only with money that you can afford to put away for a long time.

If you are older than 59 1/2, however, you get all the tax benefits of IRAs without having to put your cash out of reach. Each year's IRA contribution is deductible from your income taxes, and the earnings on those savings build up tax deferred. Starting in January, a working person can put up to $2,000 a year into an IRA ($2,250 if the IRA covers a nonworking spouse).

Here are some questions to think about when deciding whether the time is ripe for you to start your own IRA:

What are the penalties for withdrawing IRA money before age 59 1/2?

You will owe a tax penalty of 10 percent of the amount withdrawn. This is in addition to any penalties that arise from breaking out of the IRA investment itself.

You can put IRA money into savings certificates, insurance-company annuities, mutual funds, stocks or bonds. You'll owe a six-month interest penalty for withdrawing from an 18-month savings certificate before maturity, and there are normally heavy penalties for quitting an annuity. There are usually no penalties for selling stocks, mutual funds and bonds, but you may have to sell when the market is down.

May I borrow against my IRA investment?

Not without paying a 10 percent penalty on the amount of the IRA used as collateral. You also pay income tax on the money, as if it had been withdrawn from the IRA itself. If you borrow directly from the IRA, you not only incur the penalty, you also wipe out the IRA as a tax-deductible investment. All the money from the IRA would be treated as taxable income in the year the loan was made.

Are there any circumstances that would let me withdraw from an IRA before age 59 1/2?

You may take the money out without paying a tax penalty if you become totally disabled, as defined by the Internal Revenue Service.

How do I handle my IRA after age 59 1/2?

As long as you're working, you may continue to make contributions. You may also withdraw IRA money whenever you want to. (Of course, you would still pay penalties for withdrawing early from a savings certificate or annuity.) The money withdrawn is taxed as ordinary income in the year that you take it out.

What if my IRA contains stock market profits? Do I get the low capital gains tax?

No. All IRA money is considered ordinary income, regardless of its source. If you plan to hold both savings certificates and stocks for your old age, it would pay to put the savings certificates into an IRA and hold the stocks personally. Then, when you sell the stocks, you would get the benefit of the capital gains tax.

Don't make the mistake of putting tax-exempt municipal bonds or All Savers certificates into IRAs, as some "advisors" are actually suggesting. Outside an IRA, the interest on these investments is tax-exempt; inside an IRA, it's fully taxable.

What happens to the IRA if I quit working?

You may make no new contributions. But you may continue to manage your current pool of IRA savings as you see fit--either leaving it alone or switching it from one investment to another in hopes of getting higher returns.

May I leave money in an IRA indefinitely?

No. At age 70 1/2, you must start withdrawing money, in amounts large enough to exhaust the fund over your lifetime or over the joint lifetimes of you and your spouse. There is a severe penalty for not withdrawing the money on time.

What happens to an IRA if I die?

If you name no beneficiary, it is included in your estate, which pays the income taxes and any estate taxes. If you name a beneficiary, estate taxes can be avoided--but only if the beneficiary takes the proceeds in installments over 36 months or more. If they're taken any faster, estate taxes may be due. Be sure that your beneficiary understands this.

Most beneficiaries owe income taxes on the money when it's paid out. But if the beneficiary is your spouse, he or she can roll the proceeds into another IRA and continue the income-tax deferral.