Traditional and Roth IRAs
01.Individual Retirement Accounts
An IRA is a retirement account you open yourself at a brokerage. A Traditional IRA offers a tax deduction today, with withdrawals taxed later. A Roth IRA is funded with after-tax money, but all growth and future withdrawals are 100% tax-free.
02.Choosing Between Traditional and Roth
If you are in a high tax bracket now, a Traditional IRA provides valuable tax relief today. If you expect to be in a higher tax bracket in retirement or want tax-free growth, choose the Roth. You can contribute to both an IRA and a 401(k)!
03.Contribution Limits
The IRS sets strict annual contribution limits for IRAs. In 2026, the limit is $7,000 (plus an extra $1,000 catch-up if you are 50+). Try to automate monthly contributions to hit these limits.