Aug 17 • Investing
What is an IRA⁉️
Traditional IRA
- Contributions may be tax-deductible, depending on your income and whether you have a retirement plan through your employer.
- Investments grow tax-deferred, meaning you don’t pay taxes on gains until you withdraw.
- Withdrawals in retirement are taxed as ordinary income.
- Required Minimum Distributions (RMDs) must begin at age 73 (as of 2025).
- Early withdrawals before age 59½ may be subject to a 10% penalty, plus income tax.
2. Roth IRA
- Contributions are made with after-tax dollars (not tax-deductible).
- Qualified withdrawals are tax-free (both contributions and earnings) if:
- No RMDs during your lifetime.
- You can withdraw contributions (not earnings) at any time, tax- and penalty-free.
Other Types of IRAs:
- SEP IRA: For self-employed individuals or small business owners.
- SIMPLE IRA: For small businesses with fewer than 100 employees.
- Rollover IRA: Used to move funds from a workplace retirement plan (like a 401(k)) into an IRA.
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What is an IRA⁉️
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