What is an IRA (Individual Retirement Account)?

An Individual Retirement Account (IRA) is a popular long-term retirement savings plan designed to help individuals save and invest for their retirement years. IRAs are designed for individuals with or without access to employer-sponsored retirement plans like the 401(k). 

IRAs offer certain tax advantages, which allow individuals to contribute pre-tax or post-tax income (depending on the type of IRA). Roth IRAs allow individuals to potentially grow their investments tax-free until they begin withdrawing funds in retirement.

Why Invest in an IRA?

IRAs provide a flexible and efficient way for individuals to build a nest egg for retirement and come with a wide range of investment options to suit different financial goals and risk tolerances. 

Depending on the type of IRA you choose, you may be able to lower your current tax liability when you contribute or allow for potentially tax-free withdrawals in retirement.

What are the different types of IRAs?

When choosing between different types of IRAs, it's important to understand each IRA's unique set of rules and benefits. You'll want to consider income restrictions as well as potential tax advantages.

Compare Traditional and Roth IRAs
 

The two primary types of IRAs:

Roth IRA

This is a great option if you want to pay taxes now and potentially not have to pay taxes when you retire.

Roth IRA benefits: 

  • Ideal for early contributors in a lower tax bracket 
  • Contributions are non-deductible 
  • Can provide tax-free distributions with no taxes on gains in retirement 
  • Has a minimum investment of at least $1,000
What is a Roth IRA?
 

Traditional IRA

If you’re looking for an easy way to build your retirement portfolio and want to defer paying taxes until after you retire, a Traditional IRA could be a good choice.

Traditional IRA benefits: 

  • Ideal for contributors in their peak earning years 
  • Contributions may be tax-deductible 
  • Can potentially pay lower taxes on distributions if in a lower tax bracket in retirement than in pre-retirement.
  • Have a minimum investment of at least $1,000
What is a Traditional IRA?
 

Find additional IRA offerings ...

Rollover IRA*

Choosing to consolidate your existing 401(k)s and IRAs into one easy-to-manage account can provide you with great options. Rollover IRA benefits include:

  • Ideal for moving assets from a previous retirement plan to a new IRA 
  • Maintains tax-deferred status throughout 
  • Ability to consolidate multiple 401(k)s into one centralized account 
  • Gain a diverse range of investment options

Simplified Employee Pension (SEP)

Business owners and self-employed individuals might prefer SEP IRAs because they are cost-effective, with fewer startup and ongoing expenses than traditional plans. SEP IRA benefits include:

  • Ideal for small business owners and self-employed individuals
  • Employers can make tax-deductible contributions to employees' retirement accounts 
  • SEP IRAs have higher annual contribution limits than typical IRAs

SIMPLE (Savings Incentive Match Plan for Employees) IRA

The SIMPLE IRA is a retirement savings option that offers employee salary deferral contributions and employer matching contributions for small business owners and self-employed individuals. SIMPLE IRA benefits include:

  • Ideal IRA option for small business owners with 100 employees or less 
  • Individuals can set up a tax-deferred savings plan 
  • Employers get a tax deduction for contributions they make for employees 
  • There are minimal paperwork requirements

How can I start a Roth IRA or a Traditional IRA?

T. Rowe Price offers a broad range of one-stop retirement funds, low-cost mutual funds, and digital investing powered by our experts—all with historically competitive long-term performance.

Invest with a Roth IRA

Save for your future with the potential to enjoy tax-free income in retirement.

Open a Roth IRA
 

Invest with a Traditional IRA

Build your retirement savings while taking advantage of tax benefits today.

Open a Traditional IRA
 

Need help finding the right account?

Speak with one of our financial consultants.

Monday–Friday, 8 a.m.–8 p.m. ET

Call 1-800-332-6161
 

*Consider all available options, which include remaining with your current retirement plan, rolling over into a new employer's plan or IRA, or cashing out the account value. When deciding between an employer-sponsored plan and IRA, there may be important differences to consider, such as range of investment options, fees and expenses, availability of services, and distribution rules (including differences in applicable taxes and penalties). Depending on your plan's investment options, in some cases, the investment management fees associated with your plan's investment options may be lower than similar investment options offered outside the plan.

All investments involve risk, including possible loss of principal.

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