Which IRA is best for you?

This chart may help.

Roth IRA

You're taxed when you put money in. This may be a good option if you expect your tax rate to be higher in retirement.



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  • Age Requirements

    Contribute at any age.


  • Maximum Annual Contribution

    For 2020:

     

    Under 50: $6,000

     

    50 & up: $7,000

     

     

     

     

     

     

  • 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.

     

     

     

     

     

  • Restrictions

    Depends on your income or filing status.

Traditional IRA

You're taxed when you take money out. This may be a good option if you expect your tax rate to be lower in retirement.



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  • Age Requirements

    Contribute at any age (except individuals who turned 70½ or older in 2019 cannot make contributions for tax year 2019).

  • Maximum Annual Contribution

    For 2020:

     

    Under 50: $6,000

     

    50 & up: $7,000

     

     

     

     

     

     

  • 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.

     

    IRS rules require you to start taking required minimum distributions, or RMDs, each year starting at age 72 (or age 70.5 if you turned 70.5 on or before December 31, 2019).

  • 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 Your contributions may be tax-deductible today, and your money grows tax-deferred until withdrawn in retirement.

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  • Age Requirements

    Contribute at any age


  • Maximum Annual Contribution

    For 2020:

     

    A percentage of your self-employment income up to a maximum contribution of $57,000.

  • 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.

     

    IRS rules require you to start taking required minimum distributions, or RMDs, each year starting at age 72 (or age 70.5 if you turned 70.5 on or before December 31, 2019).

  • Restrictions

    You must have self-employment income to open a SEP IRA.

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