The media have been flooded in recent weeks with advertisements promising that you too can be a millionaire by the time you retire, thanks to the miracle of compound interest, if only you begin saving now.

The pitch is for contributions to Individual Retirement Accounts. On New Year's Day an estimated 50 million additional American workers each became eligible to put away $2,000 a year ($2,500 with a nonworking spouse) with taxes deferred on the principal and income until they are withdrawn starting between ages 59 1/2 and 70 1/2. (If the funds are withdrawn before that time or pledged as collateral, they are taxed as ordinary income and subject to a 10 percent penalty by the Internal Revenue Service.)

While the rules of who can take advantage of this tax bonanza are simple enough, whether to do so is slightly more complicated, and where to do so is infinitely more difficult.

From the tax angle, IRAs can benefit most people, generally speaking, except the very rich and the very poor. If a taxpayer is in the highest bracket, there are not only other shelters already available that will defer taxes effectively, but also municipal bonds, which provide tax-free interest income. Thus, if a worker expects to be in the 50 percent bracket after, as well as before, retirement, there is no benefit to purchasing an IRA. At the other end of the scale, a person may not pay enough income taxes to take advantage of the IRA deduction. Also, he or she may not be able to save, needing to live on the money instead.

From a psychological viewpoint, an IRA is probably not suitable for persons who anticipate major expenses down the road, such as buying a house or paying for children's college. (Still, if these occur in later years, the penalty could be paid out of the interest accumulated.) Nor is it recommended for people who count on living off their savings between jobs, or for impulse spenders. To discourage early withdrawal, IRA sellers impose a variety of penalties and termination fees in addition to the federal tax penalty. In short, it takes a firm commitment to save for the future.

Once the decision has been made to open an IRA, it is necessary to decide on the degree of security or risk desired. Banks offer the most conservative, 100 percent government-insured investments; brokerages the riskiest. Although some people advise extreme conservatism because the money may represent the difference between living comfortably and barely existing after retirement, previous investment policy usually tends to influence one's selection of IRA seller. Finally, it is a question of choosing the right company within the category.

There are at least six major types of financial institutions determined to cash in on what is anticipated to be a $20 billion a year windfall for them. The Washington Post surveyed 25 banks, savings and loans, credit unions, mutual funds brokerage firms and insurance companies at random to find out what terms they(Illegible Word) IRA accounts. The results, printed in the accompanying chart, are meant only as a sampling of what is available, not a recommendation.

In the ad cited above a two-income family that contributes $4,000 [TEXT ILLEGIBLE] rates are the prime lure of most institutions offering fixed- and variable-rate accounts today. Among those surveyed, initial rates ranged from 10 percent to 30 percent. The latter is a promotional rate offered for one month by First Maryland Savings and Loan; the rate drops to 12 percent for the next 18 months. National Savings and Trust offers a guaranteed 15 percent for the first three months. Most interest rates were in the 13 percent range.

Credit unions have the simplest IRA plans with the smallest penalties for withdrawals and fewest charges. The new 18-month certificate of deposit with no interest rate ceiling, which was created for the IRA account, is widely available at banks and thrifts. The initial rate on the fixed-interest certificate is generally higher than on the variable. The rate on existing variable certificates is usually changed each month according to an index of government securities.

If a saver believes that interest rates will go down in the next 18 months, it is to his or her advantage to invest in a fixed-rate certificate. Federal regulations do not allow switching from one type of certificate to another before maturity without six months interest penalty (unless the account holder is over 59 1/2 years old). However, if a saver invests in a fixed-rate certificate and interest rates go up, he or she can withdraw the interest -- but not the principal -- before maturity and reinvest it in another IRA at the same institution at a higher rate.

A note of caution: Rate-running is permitted by federal regulations but may not be allowed by the individual institution, so check before investing. One other caveat: federal regulations require that a penalty be imposed only on the amount withdrawn, but some institutions consider that if any funds are withdrawn from a certificate of deposit before maturity, the entire contract is void and therefore subject to penalty.

Besides a wide discrepancy in interest rates paid, there is also a wide spectrum of minimum deposits required, ranging from any amount to $2,000. Additions to accounts are usually permitted in smaller increments, but in a few cases no addition is permitted.

A transfer fee refers to the cost of shifting one's IRA resources from one fund to another within the same institution. The termination fee refers to the cost of withdrawing one's IRA from the company entirely (before age 59 1/2). Many companies rates will go down in the next 18 months, it is to his or her advantage to invest in a fixed-rate certificate. Federal regulations do not allow switching from one type of certificate to another before maturity without six months interest penalty (unless the account holder is over 59 1/2 years old). However, if a saver invests in a fixed-rate certificate and interest rates go up, he or she can withdraw the interest -- but not the principal -- before maturity and reinvest it in another IRA at the same institution at a higher rate.

A note of caution: Rate-running is permitted by federal regulations but may not be allowed by the individual institution, so check before investing. One other caveat: federal regulations require that a penalty be imposed only on the amount withdrawn, but some institutions consider that if any funds are withdrawn from a certificate of deposit before maturity, the entire contract is void and therefore subject to penalty.

Besides a wide discrepancy in interest rates paid, there is also a wide spectrum of minimum deposits required, ranging from any amount to $2,000. Additions to accounts are usually permitted in smaller increments, but in a few cases no addition is permitted.

A transfer fee refers to the cost of shifting one's IRA resources from one fund to another within the same institution. The termination fee refers to the cost of withdrawing one's IRA from the company entirely (before age 59 1/2). Many companies scale down the exit fee after the funds have been invested for several years.

Noninsured investments are offered by mutual funds, full-service brokers and insurance companies. The vehicles include mutual funds invested in growth and income stocks, corporate bonds, international stocks and money market funds. Insurance companies sell what amount to mutual funds coupled with annuities. In addition to mutual funds, brokerage firms offer selfdirected IRA accounts. The investor can move funds almost at will between stocks, corporate bonds, savings accounts, money market funds, options, limited partnerships in oil and gas leases and real estate, silver and gold certificates, et cetera.

Insurance companies offer front and back-loaded Individual Retirement Accounts. This means the commission is either subtracted at the start or at the end if the funds are withdrawn prematurely before the account has been in effect a certain number of years. Prudential, for example, charges a 7 percent fee if the funds are withdrawn in the first year. That percentage scales down to zero after seven years. But a 55-year-old new annuitant would not be penalized for withdrawing funds at 59 1/2. The company is at liberty to change the interest rate on the account whenever and by however much it wishes. The payout after retirement may take the form of a fixed sum over a given number of years, or until the death of the annuitant or that of his or her survivor.

Most brokerages charge initial fees to open an account and an annual administrative or custodial fee to offset the costs of paperwork. This is in addition to the regular commissions charged on stock and bond transactions or the front-end load built into some mutual funds. The fee for mutual funds tends to be much lower than that for selfdirected accounts; $35 and $5, respectively, are typical charges. Fees for setting up or maintaining an IRA are tax deductible.

A person may decide to split his or her IRA contributions, say between a money market fund and an aggressive growth stock fund. In this case, there is usually a fee for transfer or for establishing each fund plus annual charges. However, a person who invests in a self-directed account can change at will without charge. According to Andrew Freund of Bache Halsey, 99 out of 100 clients remain either in mutual funds or in self-directed. Should a person feel that he or she would like to start an IRA on a conservative note and progress to self-directed investments later or split funds from the beginning between the two, the person should select the self-directed program.

IRA funds are taxed at the full rate when withdrawn. The presumption is that the retiree will have less income at that time and be in a lower tax bracket. Barry Goodman, a manager of the accounting firm of Leopold and Linowes, was asked whether a working person in the top tax bracket would be better off setting up a self-directed IRA to invest in stocks or whether the person would be advised to invest in stocks outside an IRA and pay on the proceeds as capital gains.

Goodman found that even with capital gains, an investor would be better off buying stocks through an IRA and paying earned income taxes on them later. He made calculations on the basis of a $2,000 contribution for 10 years at 10 percent. After retirement the funds are withdrawn over a 10-year period. If the investor's tax bracket drops from 50 to 30 percent at retirement, his or her net rate of return on stocks bought outside an IRA and sold after retirement is 9.15 percent.

For stocks bought within an IRA the rate of return amounts to between 12.36 and 13.42 percent. The lower return assumes the investor gets the tax savings at the end of the tax year; the higher return, at the beginning of the year. To get the savings earlier, the investor can increase withholding exemptions.