Exploring IRAs
An Individual Retirement Account (IRA) is a long-term savings account that has certain tax advantages. The IRA is designed for self-employed people who do not have access to employer-sponsored workplace retirement options.
|
Feature |
Traditional IRA |
Roth IRA |
SEP IRA |
SIMPLE IRA |
|
Eligibility |
Anyone with income |
Income limits apply |
Self-employed or small business owners |
Small employers and self-employed |
|
Contribution Limits (2023) |
$6,500 ($7,500 if 50 or older) |
$6,500 ($7,500 if 50 or older) |
Lesser of 25% of compensation or $61,000 |
$14,000 ($17,000 if 50 or older) |
|
Tax Treatment (Contributions) |
Pre-tax (tax-deductible) |
After-tax |
Pre-tax (employer contributions) |
Pre-tax |
|
Tax Treatment (Withdrawals) |
Taxable as income |
Tax-free |
Taxable as income |
Taxable as income |
|
Withdrawal Rules |
Penalty if before 59½ (with exceptions) |
Tax-free and penalty-free after 59½ (if account is 5 years old) |
Penalty if before 59½ (with exceptions) |
Penalty if before 59½, additional restrictions for first 2 years |
|
Employer Match |
Not applicable |
Not applicable |
Not applicable, employer contributions only |
Mandatory employer contributions |
The information provided here is not intended as tax or legal advice and should not be taken as such; consult a qualified attorney or certified public accountant for professional guidance.