Retirement Accounts

Traditional IRA

• Contributions may be tax-DEDUCTIBLE (depends on income & employer plan)
• Growth is tax-DEFERRED
• Withdrawals taxed as ORDINARY income
• Required Minimum Distributions (RMDs) at age 73
• 10% early withdrawal penalty before age 59½ (with exceptions)
• Contribution limit: $7,000/year ($8,000 if age 50+) for 2024

Roth IRA

• Contributions are NOT tax-deductible (after-tax money)
• Growth is TAX-FREE
• Qualified withdrawals are TAX-FREE (after 5 years + age 59½)
• NO Required Minimum Distributions during owner's lifetime
• Income limits apply for contributions
• Same contribution limits as Traditional IRA

401(k) (Employer-Sponsored)

• Pre-tax contributions reduce current taxable income
• Employer may match contributions (free money!)
• Higher contribution limits: $23,000/year ($30,500 if 50+) for 2024
• RMDs at age 73
• 10% penalty before 59½
• Roth 401(k) option: after-tax contributions, tax-free withdrawals

403(b) — for nonprofits, schools, churches

• Similar to 401(k) but for tax-exempt organizations
• Same contribution limits and rules

457 — for state/local government employees

• NO 10% early withdrawal penalty (unique advantage!)
• Same contribution limits
• Can contribute to BOTH 457 and 403(b) if eligible

SEP IRA (Simplified Employee Pension)

• For self-employed / small business owners
• EMPLOYER contributions only (up to 25% of compensation, max $69,000 for 2024)
• Easy to set up and administer

SIMPLE IRA

• For small businesses (100 or fewer employees)
• Employee AND employer contributions
• Lower limits than 401(k)