Benefits of an IRA

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Benefits of an IRA

An Individual Retirement Account (IRA) is a valuable tool for building retirement savings. Depending on whether you choose a Traditional or Roth IRA, your money can grow either tax-deferred or tax-free. Learn more about their benefits and see whether or not an IRA is right for you!

How Do IRAs Work?

Most people will need 55%–80% of their pre-retirement income to maintain their lifestyle in retirement, and a 401(k) alone may not be enough. While 75% of Americans have access to employer-sponsored plans like a 401(k), these plans can be limited and subject to change by your employer. An IRA can help fill the gap—offering broader investment choices, more control, and the ability to contribute even if you change jobs. Best of all, you can contribute to both a 401(k) and an IRA to maximize your retirement savings.

An IRA offers a tax-advantaged way to save for retirement. Traditional IRAs offer tax-deferred growth, and contributions may be tax-deductible. Roth IRAs provide tax-free growth and tax-free withdrawals in retirement.

Other Key Benefits Include:

  • Compounded Growth – Investments within an IRA grow tax-deferred (or tax-free, in Roth IRAs), allowing for greater long-term accumulation.
  • Diverse Investment Options – IRAs typically allow a wide range of investment choices, including money market accounts, certificates of deposit (CDs), stocks, and bonds.
  • Retirement Flexibility – IRAs can complement other retirement accounts, giving you more control over contributions and withdrawals.
  • Broad Accessibility – Most individuals with an earned income are eligible to open and contribute to an IRA, making it a widely accessible retirement savings tool.

Both Roth and Traditional IRA allow for contributions if you have earned income. Withdrawals prior to age 59½ may be subject to ordinary income tax and a 10% early withdrawal penalty unless you qualify for an IRS exemption. While both Traditional and Roth IRAs offer tax advantages, the timing of that benefit, and other key difference impacts which option is better suited to your needs. The features below can help you decide which is best for you.  


Features of a Roth IRA

  • Ability to contribute may be reduced or eliminated based on your income and tax filing status 
  • Contributions are made with after-tax dollares (money that you've already paid taxes on)
  • Earnings in your Roth IRA grow tax-free
  • Qualified withdrawals, including earnings, are penalty and tax-free, provided: the account has been open for at least five years and you are age 59 ½ or older, disabled, or deceased
  • There are no required minimum distributions (RMDs) during the original owners lifetime
  • Contributions, not earning, can be withdrawn at any time for any reason without taxes or penalties

Features of a Traditional IRA

  • Contributions made with after tax dollars
  • May be tax-deductible 
  • Earning grow tax-deferred
  • You pay taxes on contributions and earnings when you withdraw
  • RMDs are required once you reach the age of 73

For 2025, the annual contribution limit accross all your IRAs (both Traditional and Roth combined) is:

  • $7,000 if you're under age 50
  • $8,000 if you're age 50 or older (includes a $1,000 "catch-up" contribution)
  • You must have earned income at least equal to your contribution amount

Roth IRA Contribution limits

Your eligibility to contribute to a Roth IRA can be reduced or eliminated based on your filing status and Modified Adjusted Gross Income (MAGI). See below for contributions limits in 2025. 


Single or Head of Household:

  • Full contribution if your MAGI is less than $146,000
  • Partial contribution if MAGI is between $146,000 and $161,000
  • No contribution allowed if MAGI is $161,000 or more

Married Filing Jointly:

  • Full contribution if MAGI is less than $230,000
  • Partial contribution if MAGI is between $230,000 and $240,000
  • No contribution allowed if MAGI is $240,000 or more

Married Filing Separately:

  • Partial contribution if MAGI is less than $10,000
  • No contribution if MAGI is $10,000 or more
Visit our website for more information on IRA Share Accounts or Contact us to learn more or to schedule an appointment at your local branch.