Retirement IRA Account by J.P. Morgan

IRA stands for individual retirement account, which is distinct from a workplace retirement account, such as a 401(k).

An IRA account is a tax-advantaged way of saving for retirement. A company’s 401(k) may not be enough to help you reach your financial milestones, so contributing to an IRA can help bring you closer to your retirement goals. The two main types of IRAs are Traditional and Roth.

Traditional IRA contributions may be tax-deductible. When it’s time to make a withdrawal, the funds are taxed as income. Anyone with an earned income is eligible, but deductibility depends upon your income and whether you have a workplace retirement plan.

With a Roth IRA, you contribute after-tax dollars now and can get tax-free withdrawals of "qualified distributions." Eligibility is based on how much you earn.

Maximum IRA contributions can change from year to year. For 2021 and 2022, the cumulative max IRA contribution you can make to all your IRA accounts is $6,000, or $7,000 if you’re 50 years old or older. Note that you may be able to contribute to both an IRA and your company’s 401(k), or other employer sponsored retirement account.

How much you need to retire depends on many factors including when you retire and your expected cost of living, so it’s often a good idea to work with a financial professional to help determine how much you may need. You can also use our helpful retirement calculator to estimate your future savings.