DO NOT PUBLISH DUPLICATE -9 Ways to Invest in an IRA

There are not nine separate types of individual retirement accounts (IRA), but there are nine clear doorways that lead to IRAs. For example, there's no retirement account specifically called a "spousal IRA," but there are rules that allow a non-working spouse to build an IRA of their own. In this article, you'll find an overview of nine ways to put your money to work in an IRA and important facts to know about each.

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1. Traditional IRA

One of the best-known types of IRAs is called a traditional IRA. This type of retirement account allows you to save for your senior years using pre-tax dollars. That means you'll pay no taxes on those earnings now but will owe taxes after you retire. Traditional IRAs are popular with investors who believe they'll be in a lower tax bracket after retirement than they're in today.

• Who's eligible: Anyone with an earned income.
• Annual contribution limits: $7,000 for 2025 tax year, with an additional $1,000 for those 50 and older.
• Tax details: Investors can withdraw contributions at any time tax-free. However, they'll incur taxes and penalties if they withdraw earnings before age 59 1/2 and have held the account for less than five years.

2. Roth IRA

Contributions to a Roth IRA are made with money you've already paid taxes on. However, withdrawals in retirement are made tax-free, saving you money throughout your senior years.

• Who's eligible: Anyone who earns an income greater than the amount they plan to contribute, but whose income falls within IRA guidelines (see income requirements below).
• Annual contribution limits: $7,000 for 2025 tax year, with an additional $1,000 for those 50 and older.
• Tax details: Funds can be accessed without penalty after age 59 1/2. Once withdrawn, earnings are taxed at the ordinary income tax rate.

Roth IRA income limits for 2025

  3. Roth IRA for kids

A Roth IRA for kids allows minors to contribute after-tax dollars toward retirement, with a parent or adult assigned as an account custodian who manages the assets.

• Who's eligible: Any minor with earned income.
• Annual contribution limits: A maximum of $7,000 for the 2025 tax year or the total amount of money earned by the minor during the year, whichever is less.
• Tax details: Funds can be accessed without penalties after age 59 1/2. Once withdrawn, earnings are taxed at their ordinary tax rate.

4. Spousal IRA

A spousal IRA is simply a traditional or Roth IRA that allows a spouse who's earning low (or no) annual wages to save for retirement in an account in their name only.

• Who's eligible: Married and filing a joint return.
• Annual contribution limits: $7,000 for 2025 tax year, plus a $1,000 catch-up contribution for those 50 and older.
• Tax details: Same rules as those for a traditional or Roth IRA, depending upon whether a traditional or Roth account was opened.

5. Self-managed IRA

A self-managed IRA is sometimes called a self-directed IRA, self-directed brokerage account, or self-directed investing. Rather than a separate investment vehicle, a self-managed IRA is a type of a traditional or Roth IRA. As the name suggests, it allows you to select your own investments.

• Who's eligible: Same rules as traditional and Roth IRAs.
• Annual contribution limits: Also subject to the same rules as traditional and Roth IRAs.
• Tax details: Same rules as those for a traditional or Roth IRAs.

6. SEP IRA

A simplified employee pension (SEP) IRA is a traditional IRA that an employer sets up for employees, including themselves or for self-employed people. A SEP is a nice option for a small business owner.

• Who's eligible: Employers and self-employed individuals.
• Annual contribution limits: Contributions are based on business cash flow and are limited to the lesser of 25% of employee compensation but no more than $70,000 for the 2025 tax year.
• Tax details: SEP earnings grow tax free and are subject to the same withdrawal rules as traditional IRAs.

7. SIMPLE IRA

A Savings Incentive Match Plan for Employees (SIMPLE) IRA is another type of traditional IRA. It's designed specifically for businesses with 100 employees or less.

• Who's eligible: Employers, employees and self-employed individuals.
• Annual contribution limits: In 2025, employees under the age of 50 can contribute up to $16,5000. plus an additional $3,500 catch-up contribution. Employees between the ages of 60 and 63 enjoy a boosted catch-up amount of $5,250.
• Tax details: Rules regarding withdrawals are nearly the same as a traditional IRA, with one exception: Withdrawals made within two years of contribution may be subject to penalties.

8. Rollover IRA

A rollover IRA is created by transferring funds from a previous workplace retirement plan into a traditional IRA.

• Who's eligible: Anyone with a workplace retirement plan from a previous employer. This includes 401(k), 403(b), and 457 plans.
• Annual contribution limits: Participants can roll over all or a portion of their retirement accounts, with an exception for issues like outstanding loans drawn from the account.
• Tax details: Funds can be accessed without penalty after age 59 1/2. Once withdrawn, earnings are taxed at the ordinary tax rate.

9. Inherited IRA

An inherited IRA is a retirement account left to you by someone who has passed away.

• Who's eligible: Beneficiaries of an IRA.
• Annual contribution limits: No additional contributions can be made.
• Tax details: Taxes are based on the type of the original account, but withdrawals can be made from an inherited IRA at any time without penalty.

With an IRA, you get to decide which type best fits your situation and goals. You even get to determine if you'd rather pay taxes now or after you've retired. It's that flexibility that makes IRAs an attractive investment option.