Advertiser Disclosure

6 Types of IRAs: Find the Right IRA Type for You

Want to Earn Some Extra Money?

  • SurveyJunkie: Earn up to $50 per survey with one of the highest-paying survey sites on the web. Join SurveyJunkie Now
  • Mistplay: Earning money by playing games on your phone sounds like a dream. But this app really pays you for playing new games with cash rewards. Download Mistplay for Free (Android only).
  • Robinhood: This investing app lets you trade stocks and do everything for free and takes no fees — ever. Better yet, if you join through this link you can get a free stock like Apple, Ford, or Sprint when you join (must complete signup).

One thing we can all agree on is that there are many different types of IRA accounts and it can be tough to know which one to choose. Don’t worry, we are here to show you the different types of retirement accounts and which type of IRA can best benefit your financial and retirement goals. Keep reading to learn which IRA account is best for you and even how to put precious metals into your IRA plan and more.

1. Traditional IRA

The most popular type of IRA is called a traditional IRA account. This type of IRA has many tax-advantages. It typically is used as a retirement account. The tax you pay is upfront which is an advantage is taxes go up over time. You will also get a tax write off when you contribute.

This can help you go into a lower income bracket or simply lower the taxes you pay or increase them at the end of the year. The next benefit is that the investments are not taxed when the money stays in the account. If you can keep the money in the account until you retire the money is then taxed at whatever rate it is currently at. This is perfect for people that want to get below a specific tax bracket.

2. Roth IRA

The next type of IRA is called a Roth IRA. This is a great account for long-term growth. One of the best perks about this account is that any money put in is not taxed. There is no upfront tax as long as you wait until you are retired to take any money out.

Depending on your income will determine if you can put money into a Roth account. You do not get a deduction from your taxes when you contribute to a Roth IRA and that is the downside. This account is great for people that are thinking about long-term growth. They don’t need to worry about what taxes are down the road because it won’t be taxed.

3. SEP IRA

Want free money?

  • Aspiration: Want to get spotted a $100 for free? Simply sign up for Aspiration, and the free banking app will give you cash for free, you just relax while it gives you $100 just for opening a new debit card. There’s no catch, just use your card to make at least $1,000 in cumulative transactions within 60 days of opening an account. This bank account is legit and only takes two minutes to sign up for an account.

The third type of IRA account is called a SEP IRA. This stands for simplified employee pension. It is a traditional IRA and is great for employees. They will get a tax benefit. The earnings are grown completely tax-free and are given out in amounts once the employee is retired. At that time, people are then taxed.

The amount of annual contribution must be less than 25% of the employee annual income. These numbers are different if you are self-employed. This is a great option for small businesses. There is no startup cost to this retirement plan, and it helps the employees.

4. Nondeductible IRA

The next type of IRA account is a Nondeductible IRA. When you contribute to this account, it can only be made from after-tax money and is not deductible. With that said, you can still enjoy it being tax-deferred when it grows. This is perfect for people that don’t qualify for a Roth IRA.

5. Spousal IRA

If one of the spouses does not have an income but still wants to have an IRA, a spousal IRA is a great option. It also works if one of the spouses simply has a low income. They can contribute ten to a Roth or traditional however it is under the umbrella of spousal IRA.

It’s important to note there are some things that need to be done in order to qualify for this. The couple must have a joint tax return. Contributions are also allowed annually of $5500 or under.

This is a great option if one spouse does not work or does not work much and still wants to save for retirement.

6. SIMPLE IRA

The sixth and final IRA we are going to talk about is a SIMPLE IRA. Simple stands for Savings Incentive Match Plan For Employees. This ends up being self-explanatory after you read that. This is like a SEP IRA; however, each employee can contribute through their salary. For example, a certain amount of money can be taken out each paycheck and they never even see it. It just goes straight into their SIMPLE IRA.

One downside to this is that you are not able to contribute as much. An employer is also typically supposed to give 3% to each employee in their account. Like most IRA accounts, there is a penalty if you take it out early. A SIMPLE IRA is higher than most IRA accounts. It is 25% if you take it out earlier.

This option is great for businesses that have less than 100 employees. If you are self-employed, a SEP option would be better for you than a SIMPLE IRA as you can contribute more.

Find the Right IRA Type for You

As you can see, there are many options of IRA accounts out there. The goal is to choose the one that will most benefit you. Although a traditional IRA account may benefit you now, it may not pay off when you go to use it years from now. In comparison, if you want the tax savings now, a traditional option may be perfect for you and allows you to save more money now that can be better for you and your family.

Make sure to write down what you are looking for in an IRA and speak with a professional. Be honest and upfront with them so they can assist you as much as possible. Tell them your salary each year and how much you think you can save that. If you know you are not very good with money, tell them that. They can suggest options that take the money right out of your paychecks, so you don’t even see it. You are saving and planning for retirement without even realizing it.

If you have more questions about the best IRA accounts and which one is right for you, let us know.

The Best Investment Apps For Everyday Investors

App Rating CommissionsLearn More
robinhood logo

5.0/5 

Free$0

OPEN ACCOUNT
On Robinhood's website

M1 finance

5.0/5

Free$100

Games that pay you to play. Yes, we're serious.

These 3 apps will pay you to play games on your mobile device:

  1. Mistplay (Android) - If you have an android device, you can download this app and start getting cash rewards for playing new games.
  2. Solitaire Cube (iOS) - Earning money by playing games on your phone sounds like a dream. But this app really pays you for playing solitaire with cash rewards.
  3. Lucktastic (Android) - This free app offers the same daily scratch-off cards that you find at your local convenience store — but here you can play for free and win real money.

OPEN ACCOUNT
On M1 Finance's website

fundrise

5.0/5

0.15%$500

OPEN ACCOUNT
On Fundrise's website

public

5.0/5

Free$0

OPEN ACCOUNT
On Public's website

webull logo

4.9/5

Free$0

OPEN ACCOUNT
On Webull's website

Want free money?

  • Robinhood is a free investing app for your phone. I really mean free all around – free to join and they don’t charge any fees to buy or sell the stock. You can get a share of stock like Apple, Ford, or Sprint for free when you join through this link. The value of the free share may be anywhere between $2.50 and $200 and fluctuates based on market movements. You’ve got nothing to lose.
Adriana Flores
Adriana Flores
Adriana is a contributor at My Millennial Guide and focuses on millennial money management. She has a love for the Chicago Cubs and spending time with family and friends.

Related Posts

Do NOT follow this link or you will be banned from the site!