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Each type of IRA has certain restrictions based on your income, tax filing status, employment status and other factors. Be sure to review the information below carefully. Marcus Invest does not offer legal or tax advice. Consult a tax professional or the IRS website for additional information. 

Traditional IRA

Roth IRA

SEP IRA (Simplified Employee Pension IRA)

Highlights

You may be able to deduct your contributions from your taxable income, depending on your circumstances, and your money is tax-deferred until you withdraw it in retirement. 

This may be a good option if you expect your tax rate to be lower in retirement than it is now.

Your contributions are made with after-tax dollars, but your withdrawals in retirement are tax-free.

This may be a good option if you expect your tax rate to be higher in retirement than it is now.

This is an option for the self-employed. Your contributions may be tax-deductible, and your money is tax-deferred until you withdraw it in retirement.

Generally, the maximum annual contribution limit for SEP IRAs is higher than traditional and Roth IRAs.

Who can contribute

You can contribute if you have taxable employment income.

You can contribute if you have taxable employment income and can meet certain criteria regarding your income and tax filing status.

You can contribute if you are self-employed.

Visit the IRS for more information on who can participate in a SEP IRA. 

Maximum annual contribution limits

Up to $6,000 for the 2020 and 2021 tax years ($7,000 for those 50 and older)

Up to $6,000 for the 2020 and 2021 tax years ($7,000 for those 50 and older)

A percentage of self-employment income up to a maximum contribution of $57,000 (for 2020) or $58,000 (for 2021)

Tax deduction

Contributions may be tax-deductible if you meet certain eligibility rules.

If you or your spouse is covered by a workplace retirement plan (e.g., 401(k)), you may not be able to deduct contributions made to this type of IRA.

Contributions are not tax-deductible.

Contributions may be tax-deductible. 

Visit the IRS FAQ page for more information.

Withdrawals

Withdrawals prior to the age of 59 ½ are generally subject to income tax and a 10% early withdrawal penalty unless you qualify for an exception

After the age of 59 ½, withdrawals are subject to income tax, but there’s no early withdrawal penalty.

Contributions can be withdrawn tax-free and penalty-free at any time. 

Withdrawals of earnings prior to the age of 59 ½ (or before the account is 5 years old) are generally subject to income tax unless it’s a qualified distribution and to a 10% early withdrawal penalty unless you qualify for an exception.

SEP IRAs follow the same rules as Traditional IRAs.

Withdrawals prior to the age of 59 ½ are generally subject to income tax and a 10% early withdrawal penalty unless you qualify for an exception

After the age of 59 ½, withdrawals are subject to income tax, but there’s no early withdrawal penalty.

Required Minimum Distributions (RMDs)

You’re required by the IRS to start taking distributions by April 1 following the year you turn age 72 and by December 31 in the following years. Failure to take RMDs may result in penalties.

RMDs were required starting at age 70 ½ if you reached the age of 70 ½ before January 1, 2020.

Visit the IRS for more information.

No RMDs if you’re the original owner of the account.

SEP IRAs follow the same rules as traditional IRAs.

You’re required to start taking distributions by April 1 following the year you turn age 72 and by December 31 in the following years. Failure to take RMDs may result in penalties.

RMDs were required starting at age 70 ½ if you reached the age of 70 ½ before January 1, 2020.

Visit the IRS for more information.

Goldman Sachs does not monitor whether a customer is eligible for a particular type of IRA, or a tax deduction, or if a reduced contribution limit applies to a customer. These are based on a customer’s individual circumstances. You should consult with a tax advisor. Certain IRA options may not be available due to your particular IRS qualification.

Taking money out of an IRA is not like taking money out of your bank account. Withdrawing money before a certain age may be subject to penalties in addition to income taxes, depending on the IRA type you choose. 

This article is for informational purposes only and shall not constitute an offer, solicitation, or recommendation to buy or sell securities, or of an account type, securities transaction, or investment strategy. This article was prepared by and approved by Marcus by Goldman Sachs®, but does not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions. Goldman Sachs Bank USA and Goldman Sachs & Co. LLC are not providing any financial, economic, legal, accounting, tax or other recommendation in this article and it is not a substitute for individualized professional advice. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.  Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, none of which are a fiduciary with respect to any person or plan by reason of providing the material or content herein. Neither Goldman Sachs Bank USA, Goldman Sachs & Co. LLC nor any of their affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.

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