The two main flavours: Traditional IRA (tax deduction now, taxed on withdrawal) and Roth IRA (no deduction now, tax-free on withdrawal). Contribution limits are set annually by the IRS.
Roth IRAs are especially valuable early in a career, when income and marginal tax rates are lower. Contributions (not gains) can generally be withdrawn any time, tax and penalty-free.
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Open Financial OS →Frequently asked questions
Roth or Traditional IRA?
If you expect higher tax rates in retirement than today, Roth. If lower, Traditional. Many people benefit from having both.
Related terms
401(k)
A US employer-sponsored retirement plan with tax advantages.
Tax-advantaged account
An account that lets investments grow with reduced or deferred tax.
Retirement
The stage of life when you have enough savings and income to make paid work optional.
Compound interest
Interest earned on both your original investment and the interest it has already generated.
401(k)
A US employer-sponsored, tax-advantaged retirement plan.
Roth IRA
A US retirement account funded with after-tax dollars, with tax-free growth and tax-free qualified withdrawals.