Individual Retirement Accounts (IRAs)
Do More for Your Retirement With a Tax-Advantaged IRA
An IRA is a type of investment account that offers individuals specific tax advantages for retirement savings. These accounts are designed to help you save and invest for your retirement years.
Even those with access to employer-sponsored plans, such as a 401(k), can still tap into IRA tax advantages to boost savings and add flexibility to their portfolio. There are several benefits associated with having an IRA:
- Tax Free Growth*
- Diverse Investment Options
- Flexibility
*Consult a tax advisor
It's important to note that the specific benefits of an IRA can vary based on the type of IRA (Traditional or Roth) and individual financial situations.
Traditional IRA
Contributions to a traditional IRA may be tax-deductible, and the earnings in the account grow tax-deferred until withdrawal. However, withdrawals in retirement are generally taxed as ordinary income.
Roth IRA
Roth IRAs are funded with after-tax dollars, so contributions are not tax-deductible. However, qualified withdrawals, including earnings, are tax-free. Roth IRAs also offer more flexibility in terms of withdrawals before retirement.
Rollover IRA
This account allows individuals to transfer funds from their employer-sponsored retirement plans, such as 401(k)s, without incurring taxes or penalties, providing flexibility and continued growth for retirement savings.
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Traditional IRA | Roth IRA | |
|---|---|---|
| Funded with | Pre-tax $ | After-tax $ |
| 2024 Contribution limits | $7,000 (under age 50) | $7,000 (under age 50) |
| 2025 Contribution limits | $7,000 (under age 50) | $7,000 (under age 50) |
| Taxes | Contributions are tax-deductible | Tax-free withdrawals |
| Best for those who believe their tax rate will be | Lower in retirement | Higher in retirement |
| Income limits | None | |
Required minimum distributions | At 70 1/2 years old | None |
| Withdrawing $ pre-retirement | 10% on all withdrawals | Contributions penalty free, everything else 10% |