Individual Retirement Account (IRA)
An IRA is a tax-advantaged account that individuals use to save and invest for retirement. An IRA can utilize several underlying investments including mutual funds, fixed annuities, variable annuities, or CDs. All withdrawals are taxable. If you withdraw money from an IRA before age 59 ½, you usually are subject to an early-withdrawal penalty of 10%. There are income limitations for contributing and/or deducting contributions to an IRA.
2025 Contributions Limits
- <Age 50 = $7,000
- Age 50+ = $8,000
2025 Income Limits (MAGI – Modified Adjusted Gross Income)
- Single or Head of Household <$79,000*
- Married Filing Jointly <$126,000*
* Phase-out amounts above these thresholds
Roth IRA
Roth IRAs are similar to a traditional IRA except for how they’re taxed. Roth IRAs are funded with after-tax dollars and are not tax-deductible. All withdrawals are tax-free, though. These tax free withdrawals can be extremely useful in retirement. There are income limitations for contributing to a Roth IRA. The max contribution amount is combined with a traditional IRA and Roth IRA. Meaning you can’t max out both accounts.
2025 Contributions Limits
- <Age 50 = $7,000
- Age 50+ = $8,000
2025 Income Limits (MAGI – Modified Adjusted Gross Income)
- Single or Head of Household <$150,000*
- Married Filing Jointly <$236,000*
- Married Filing Separately <$10,000*
* Phase-out amounts above these thresholds
Simplified Employee Pension (SEP) IRA
A SEP is an IRA that is typically set up for an employer or self-employed person. Contributions by the employer are tax deductible and are on a discretionary basis. The key difference with a SEP compared to an IRA is the annual contribution limits for the SEP are higher. The start-up and operating costs for a SEP are less than traditional employer-sponsored retirement plans. Withdrawal are considered ordinary income for tax purposes.
2025 Contribution Limits
- The lesser of 25% of compensation or $70,000
* For additional information, please visit IRS.