Which IRA is best for you?
This chart may help.
Roth IRA
You contribute after-tax dollars today, and your withdrawals in retirement are tax-free. This may be attractive if you expect your tax rate to be higher in retirement.
Get Started-
Age Requirements
Contribute at any age.
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Maximum Annual Contribution
For 2020 and 2021:
Under 50: $6,000
50 & up: $7,000
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Withdrawals
Withdrawals of the money you put in are penalty and tax free.
Prior to age 59½, withdrawals from the interest and/or earnings are subject to income tax and a 10% penalty.
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Restrictions
Depends on your income or filing status.
Traditional IRA
Your contributions may be tax-deductible today, and your money grows tax-deferred until withdrawn in retirement. This may be attractive if you want to reduce the taxes you owe today or you expect your tax rate to be lower in retirement.
Get Started-
Age Requirements
Contribute until the calendar year you turn 70 ½.
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Maximum Annual Contribution
For 2020 and 2021:
Under 50: $6,000
50 & up: $7,000
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Withdrawals
Prior to age 59½ you’re generally subject to income tax and a 10% penalty.
After age 59½ you’ll be subject to income tax but no penalty.
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Restrictions
Depends on your income or filing status.
SEP IRA
If you have self-employment income, this option might let you contribute more than a Roth or Traditional IRA. Your contributions may be tax-deductible today, and your money grows tax-deferred until withdrawn in retirement.
Get Started-
Age Requirements
Contribute at any age
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Maximum Annual Contribution
For 2020:
A percentage of your self-employment income up to a maximum contribution of $57,000.
For 2021:
A percentage of your self-employment income up to a maximum contribution of $58,000.
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Withdrawals
Prior to age 59½ you’re generally subject to income tax and a 10% penalty.
After age 59½ you’ll be subject to income tax but no penalty.
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Restrictions
You must have self-employment income to open an Honest Dollar SEP IRA.
Honest Dollar does not monitor whether a customer is eligible for a particular type of IRA, or a tax deduction, or if a reduced contribution limit applies to a customer. These are based on a customer’s individual circumstances. You should consult with a tax advisor. Certain IRA options may not be available due to your particular IRS qualification.
Taking money out of an IRA is not like taking money out of your bank account. Withdrawing money before a certain age may be subject to penalties in addition to income taxes, depending on the IRA type you choose. You should consult with your tax advisor. Withdrawals generally take up to 10 business days to complete.