IRAs

An Individual Retirement Account, known as an IRA, is a personal savings plan that allows you to set aside a certain amount of money each year for retirement while you benefit from a tax break.

There are two general types of IRAs:

Traditional IRA – This is a tax-deferred retirement savings account, which means you'll pay income tax later on the money you withdraw in retirement. You'd pay a 10 percent tax on money withdrawn before age 59½. After you turn 70½, you cannot continue contributing whether you are retired or not, and you'll have to begin making withdrawals, known as required minimum distributions, from the IRA account.

Roth IRA – A retirement savings account of after-tax dollars, which means you've already paid taxes on the money you put in. You can withdraw your contributions at any time for any reason tax-free and can continue contributing to your Roth IRA regardless of your age. You pay no taxes when you withdraw after retirement.Not everyone is eligible for opening a Roth IRA, and traditional and Roth IRAs both have set annual contribution limits.

Not everyone is eligible for opening a Roth IRA, and traditional and Roth IRAs both have set annual contribution limits.

Media:

2016
Roth IRA Contribution Limit	$5,500
Roth IRA Contribution Limit if 50 or over	$6,500
Traditional IRA Contribution Limit	$5,500
Traditional IRA Contribution Limit if 50 or over	$6,500

The amount you can contribute to a Roth IRA is phased out at certain levels of income. That means your contribution may be reduced — possibly all the way to zero — if your income is too high. The level where the reduction occurs is adjusted each year for inflation and depends on your filing status.


Roth IRA Income Limits (for single filers)	Phase-out starts at $117,000; ineligible at $132,000
Roth IRA Income Limits (for married filers)	Phase-out starts at $184,000; ineligible at $194,000

Simplified Employee Pension IRA
A Simplified Employee Pension IRA (SEP IRA) is a type of traditional IRA for self-employed individuals or small business owners. Any business owner with one or more employees, as well as anyone with freelance income, can open a SEP IRA. Contributions, which are tax-deductible for the business or individual, go into a traditional IRA held in the employee's name. Employees of the business cannot contribute — the employer does.

Savings Incentive Match Plan for Employees
A Savings Incentive Match Plan for Employees (SIMPLE IRA) is another type of traditional IRA for small businesses and self-employed individuals. Employees can contribute to their SIMPLE IRA and the employer is required to make a contribution on the employee's behalf — either a dollar-for-dollar match of up to 3 percent of salary or a flat 2 percent of pay — regardless of whether the employee contributes to the account.