Traditional IRAs are tax-deferred—meaning you’ll pay taxes when you withdraw funds during retirement, rather than before you invest in the IRA

Learn about the differences between traditional and Roth IRAs

Traditional IRAs allow tax-deductible contributions, but withdrawals in retirement are taxed as income. Roth IRAs use after-tax dollars, offering tax-free withdrawals later, but income limits may restrict eligibility. Choosing between the two depends on your financial situation today and your future tax outlook.

Although anyone can contribute to a traditional IRA, not everyone can access its tax deductions

If you or your spouse contributes to a 401(k), you likely won’t be able to deduct your traditional IRA contributions from your taxes. On the flip side, if you don’t contribute to an employer-sponsored retirement account, you’re probably eligible for that tax deduction.

Roth 401(k) plans vs regular 401(k) plans

A normal 401(k) defers tax payments to later, while a Roth requires no tax payments at withdrawal time. Financial experts often recommend investing in a Roth 401(k) plan or Roth IRA when someone first starts their career to lock in a relatively low tax rate.

An individual retirement account is a type of tax-advantaged investment account

An IRA lets individuals at most income levels invest either pre- or post-tax money for retirement. IRAs are often good solutions for people who don’t have the option to invest in a 401(k) plan—or for those who want to put even more money aside for retirement.

There are four main types of IRAs to choose from

Those types are traditional, Roth, SEP, and SIMPLE. While all IRAs can help you save for retirement, each type has its own tax advantages and eligibility requirements, such as employment type or income level.

Explore the key differences between 401(k) plans and IRAs

A 401(k) is employer-sponsored, may include matching contributions, and allows higher annual contributions (up to $23,000). An IRA is self-managed, offers greater control over investments, and has lower contribution limits ($7,000). Both plans come in traditional and Roth options, but income caps may limit IRA choices, while 401(k)s have no such restrictions.

529s vs. Roth IRA

Roth IRAs and 529 plans both offer tax advantages, but they serve different goals. 529s are state-run accounts meant for education, offering tax-free growth and withdrawals for qualified expenses. Roth IRAs are built for retirement, but can also be tapped for education, with more investment flexibility and fewer contribution limits.

Backdoor Roth IRAs are loopholes used to access the tax advantages of a Roth IRA for individuals who otherwise make too much money to qualify for one

Backdoor IRAs work by investing money into a traditional IRA, and then converting that traditional IRA to a Roth IRA.

Roth IRAs were first introduced in the Taxpayer Relief Act of 1997

The Roth IRA is one of the most popular retirement accounts in the US. Nearly a quarter of Americans contributed to a Roth IRA in 2023. But this type of financial account hasn’t been around for that long.

IRAs and 401(k) plans both help individuals save for retirement, but have their differences

Anyone can open an IRA, but 401(k) plans are accessible only through an employer. These two retirement vehicles also have different contribution limits per year, with 401(k) plans allowing you to contribute significantly more than an IRA.

In most cases, if you withdraw your money from an IRA before you turn 59½ years old, you'll face a hefty 10% penalty

However, there are a few exceptions to this rule. In the case of adoption, death, terminal illness, education, homebuying, and more, you can access your funds without a strike against you. A chart outlines the different exceptions to this rule, plus the accounts to which they apply.

What's a rollover IRA?

A rollover IRA is a type of investment account that lets you move the money from an old retirement account into an IRA after you stop working for your employer. This move lets you keep your funds in a tax-deferred account without being hit with taxes, fees, or penalties. This article explains how you can roll over your money and highlights any restrictions to keep in mind. Learn more here.

The Roth IRA was named after Senator William V. Roth, Jr.

The Roth IRA was established by Senator William Roth in 1997 as part of the Taxpayer Relief Act. Roth IRAs differ from traditional IRAs in that they allow individuals to invest after-tax income for retirement rather than pre-tax income.

Annuitants have to pay income taxes on the annuity payments they receive, unless their annuities are folded into a Roth IRA

In most other cases, annuities grow tax-deferred until annuitants start to receive payments. Those payments are then taxed as regular income. Nonqualified annuities, which are bought with after-tax dollars, have different rules.

Some people roll their 401(k) into an IRA to have more control over their account

However, some argue that you could end up paying less money to invest in a 401(k) plan than you would to invest in an IRA. This article offers a list of pros and cons regarding rolling a 401(k) into an IRA.

Having two retirement accounts has its pros and cons

Contributing to both an IRA and a 401(k) lets you increase your retirement savings by about 30% every year. However, you’ll also spend more time actively investing that money and pay more in fees.

Learn how to withdraw $1K from your IRA

Normally, you face a large penalty if you take money out of your IRA before age 59½. Now the IRS is letting individuals withdraw up to $1K without facing the 10% fee (with the exception of Roth IRAs) for emergencies.

You have to earn under a certain gross amount per year to be eligible for a Roth IRA

A Roth IRA might make the most sense for someone confident that they will have a higher income in retirement than they do now. For 2025, those allowed to contribute to a Roth IRA must have a modified adjusted gross income (MAGI) of less than $150K.

A basic guide to retirement savings account options, the IRA and the 401(k)

The two main types of accounts are 401(k) plans and individual retirement accounts (IRAs)—but what do those mean, exactly? There are differences between the two types, as well as the subtypes beneath them.

A spousal IRA allows a working spouse to contribute to an IRA on behalf of their nonworking partner

This ensures both people can build financial security for the future. While it's not a separate account type, this provision requires couples to file a joint tax return to qualify, helping nonearning spouses save for retirement independently.

Mutual fund investors typically must pay a variety of different types of taxes associated with their investment, unless the funds are within tax-advantaged accounts like a 401(k) or IRA.

Spousal IRAs give spouses who do not work a way to save for retirement

In most cases, only working individuals can open and contribute to an IRA. But the IRS has a special exception for married couples: the spousal IRA. It lets the working spouse open and contribute to an IRA on behalf of their nonworking spouse.

Explore a guide to 529 college savings plans

Investors put after-tax dollars into these education-earmarked accounts, and like a 401(k) or IRA, they invest them into stocks, bonds, or funds. When it comes time to withdraw, investors do not pay any taxes on distributions. However, the money must be used for approved expenses like college tuition, textbooks, and trade schools.

7 things to know about inherited IRA rules

An inherited IRA is any kind of IRA or 401K plan you inherited from someone after they’ve died. Since there are different tax advantages for each type of retirement account, the rules you have to follow widely differ based on the account, your relationship to the deceased, and how you want to use the money. Here are the seven things you must know to navigate an inherited IRA.

529 savers can now roll funds into a Roth IRA

One of the key disadvantages of a 529 college savings plan is the possibility a beneficiary doesn’t end up going to college. Nonqualified withdrawals are subject to a 10% penalty. However, as of 2024, the SECURE Act 2.0 started allowing 529 savers to roll over $35K into a Roth IRA.

A 401(k) plan allows workers to save for retirement without paying taxes until later

With a 401(k) plans you can invest more money now and let it grow with compound interest. Americans have more than $7T invested in these types of accounts.

The IRS sets new contribution limits for IRAs and 401(k) plans each year

In 2024, individuals could contribute up to $7K across all their IRAs. People aged 50 and older could contribute up to $8K. For 2025, the IRS kept the same contribution limits.

Three ways to save for your child’s future

Parents can open a custodial Roth IRA when their child starts to earn income (think: summer job), which can help them start saving early. For example, 529 accounts help parents save for college, while UTMA/UGMA accounts function like trusts.

The prevalence of 401(k) plans and IRAs over pensions shifted investment risk from employers to employees.

Revocable trusts are typically subject to estate taxes

Irrevocable trusts, however, are not. Both types help beneficiaries avoid probate, the lengthy court process that administers a person’s estate upon death.

Most Americans take the standard tax deduction

A tax deductible is an expense that a taxpayer or business can subtract from adjusted gross income, reducing their taxable income and therefore reducing the amount of taxes owed. Governments often use tax deductibles as a way to reward people who do things that are considered beneficial to society, like charitable donations.

401(k) plans and pensions differ in who has control over the investments

With pension plans, a company contributes to an investment fund from which it distributes regular payments to a retired worker until their death. A 401(k) gives the worker control over contributions in a tax-advantaged account.

Certain trusts can bypass estate taxes—but the terms can't be changed

Putting money and other financial assets in an irrevocable trust is one way to avoid estate taxes. There are some cons to this trust, like the fact that you can't change the terms of the trust or assets in the trust after they're set. But a big pro is that any financial assets in an irrevocable trust aren't considered part of your estate, meaning they aren't subject to death taxes.

Many states offer a tax deduction for investing in their 529 plans

Different states offer different types of 529 plans (prepaid and savings), and they can require different minimum contributions. While some states offer tax deductions for residents who invest in their state’s plan, investors can choose to use a different state’s plan instead.

Most pensions are subject to federal income taxes

Those taxes kick in once someone starts taking distributions from their pension. Whether a pension is subject to state income taxes depends on the state and other factors. Learn more about how pensions are taxed in this article.

Seven early retirement lessons

After one year of retirement under his belt, financial publication Kiplinger's former editor has learned some lessons. Specifically, in this article, he shares his best early retirement advice, from when it makes sense to convert a traditional IRA to a Roth in early retirement, to how to prepare for retirement from a psychological perspective. Read more here.

Only half of American workers have retirement accounts, like 401(k) plans, through their current jobs.

If your job doesn’t offer a 401(k), you still have retirement savings options

Do you know more than a third of working adults aren't offered a 401(k) through their jobs? If you're part of that group, you still have options for retirement savings, including IRAs, taxable investment accounts, and more.

ETFs and mutual funds are both taxed on capital gains and on dividends.

529 plans have some withdrawal penalties

The IRS imposes a 10% penalty on non-qualified withdrawals from 529 college savings plans, which hold funds for education-related expenses. However, there are exceptions to the rule, including if the beneficiary dies or becomes disabled. There's also an exception for beneficiaries that receive tax-free scholarships or attend military academies.

Alternative investments carry unique tax implications

The specifics depend on the type of alternative asset, as well as how long you hold it for, and your income.

Long- and short-term capital gains have different tax implications

Short-term gains (assets held for one year or less) are taxed like regular income, at rates up to 37%. Meanwhile, long-term gains (assets held over a year) are capped at 20%, offering significant savings for high earners.

The pros of exchange-traded funds include ease of access through brokerage apps and retirement savings accounts

One unexpected perk is that ETFs are typically associated with lower capital gains tax requirements. Read this list to learn more about the benefits of investing in ETFs.

Trusts offer ways to reduce the taxes beneficiaries pay on assets in one’s estate

People of different socioeconomic classes often decide to establish a trust to avoid certain taxes. When someone dies and leaves assets to beneficiaries in a will, those beneficiaries must pay specific taxes a trust's beneficiaries avoid. It all depends on the type of trust.

How “superfunding” a 529 account works

Contributions to 529 college savings accounts incur gift taxes if they exceed preset annual limits. However, “superfunding” allows donors to contribute five years’ worth of the gift tax limit to a 529 account in one lump sum without paying additional taxes. That means individual donors can pay $90K into a 529 plan at once and still be exempt from gift taxes.

Reinvested dividends are not a way to dodge paying capital gains taxes

When an investor holds stock in a company that pays a dividend—a portion of its profits directly returned to shareholders as monthly or quarterly payments—they can choose to hold that dividend in cash, spend it, or reinvest it into more shares of that company’s stock.

PayPal's Peter Thiel turned his Roth IRA into $5B

In 1999, tech titan Peter Thiel had a Roth IRA with roughly $2K in it. By 2019, that tax-free account was worth $5B. For context, the average Roth IRA was worth roughly $39K at the end of 2018. Naturally, Thiel had a few investment options that the average person probably doesn’t have access to—but the story of his IRA’s boom is nonetheless fascinating.

How to owe nothing on your federal tax return

Do you know you can avoid owing the IRS money come tax season by making changes to your W-4? For context, a W-4 is the form you fill out when you first start a new job. It tells your new company how much money to withhold from each paycheck for taxes. Find out how to avoid writing a check to the IRS each April in this article.

The IRS answers basic questions about 529 savings plans

The plans can be used to pay for any qualifying education expenses from kindergarten to college, including tuition, fees, room and board, and even computers. Anyone can set up as many 529 plans as they want for relatives, friends, or themselves.

HSAs are triple-tax advantaged—offering tax-free contributions, investments, and withdrawals

One of the reasons HSAs are so popular is the plan's triple-tax advantage. All contributions to an HSA happen pretax, funds in the HSA can be invested in stocks, bonds, or exchange-traded funds, and withdrawals to cover medical expenses are tax-free.