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.
Get Started-
Age Requirements
Contribute at any age.
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Maximum Annual Contribution
For 2020:
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
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.
Get Started-
Age Requirements
Contribute at any age (except individuals who turned 70½ or older in 2019 cannot make contributions for tax year 2019).
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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).
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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 Your contributions may be tax-deductible today, and your money grows tax-deferred until withdrawn in retirement.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.
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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.
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).
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Restrictions
You must have self-employment income to open a 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.