Which IRA could be right for me?
E*TRADE from Morgan Stanley
03/04/24Summary: An Individual Retirement Account is a smart, easy way to boost your retirement savings. No matter your financial situation, E*TRADE has an IRA that can help you make progress toward your retirement goals.
One of the most important steps you can take to make progress towards your retirement goals is to start saving for retirement as early as possible and then keep on making regular contributions. Thanks to compound interest, the earlier you start, the less you may have to save each month to reach your retirement goals.
Your workplace retirement plan is a great place to begin, but if you’re already maxing out that account—or you don’t have access to one—you might also consider stashing retirement savings in an Individual Retirement Account (IRA).
E*TRADE offers a variety of IRAs with no annual fees or account minimums. The two main types of IRAs are traditional IRAs and Roth IRAs.
However, there are also some important differences to understand:
Are you eligible to contribute to an IRA?
There are no restrictions on eligibility to contribute to traditional IRAs but high-income earners cannot contribute to a Roth IRA (or the amount they can contribute may be reduced) if their income exceeds certain levels.
Traditional IRA
No restrictions but your eligibility to take a tax deduction for your contributions phases out:
- as your modified adjusted gross income rises if you or
- your spouse is covered by a workplace retirement plan
Roth IRA
Not for high income earners.
Your modified adjusted gross income must be below a certain limit to be eligible to contribute. In 2024:
- $161,000 for individuals
- $240,000 for married couples filing jointly
Your eligibility to contribute phases out if your modified adjusted income for 2024 is between
- $146,000 and $161,000 for individuals
- $230,000 and $240,000 for married couples filing jointly
- $0 and $10,000 for married couples filing separately
Tax benefits
Both offer tax-advantaged ways to save for retirement. You can contribute a total of $7,000 into your IRA accounts in 2024, and those age 50 or older can contribute an extra $1,000 in catch-up contributions. If you own more than one IRA, this limit applies in the aggregate to all the regular contributions made to all your traditional and Roth IRAs for the year.
Traditional IRA
Generally, no taxes paid on earnings in the account until taxes withdrawn in retirement.
Depending on income and availability of workplace retirement accounts, contributions may be deductible from your taxable income.
Roth IRA
Contributions are not deductible from your taxable income.
Generally, no taxes paid on earnings in the account. If the qualified distribution1 requirements are met, withdrawals of earnings are not subject to federal income taxes.
Withdrawals and Required Minimum Distributions (RMDs)
The rules around how and when you can (or must) access money contributed to the account differ for Traditional and Roth IRAs.
Withdrawals
Traditional IRA
Subject to tax penalties and income taxes if funds are withdrawn before age 59½.
Certain exceptions to the 10% penalty tax may apply.
Roth IRA
No tax penalties or income taxes on the withdrawal of your nondeductible contributions, but:
- tax penalties and income taxes apply to any investment earnings withdrawn prior to satisfying the qualified distribution requirements
Distributions of earnings made after you satisfy the qualified distribution requirements are income tax and penalty tax free.
RMDs
Traditional IRA
Withdrawals must begin one you reach RMD age (currently, age 73).
Roth IRA
No requirement to withdraw funds during the lifetime of the original account holder (but after-death RMD rules apply to the account holder’s beneficiaries).
You’ve got choices with E*TRADE
E*TRADE IRA owners have access to a broad range of investments within their account, including:
When you open an IRA with E*TRADE, you can choose how involved you want to be in investing your money including options to:
- build and follow your own investment strategy
- get help from our low-cost automated solution called Core Portfolios
We also offer IRAs to fit more specific needs. If you can answer ‘yes’ to any of the following questions, then we may be able to help with more customized accounts:
- Do you have a 401(k) from a previous job? A rollover IRA lets you move funds into a new traditional IRA or Roth IRA without incurring income taxes or tax penalties.
- Are you older than 59 ½? E*TRADE Complete IRA provides flexible access to cash with free checking, online bill pay and an ATM/debit card
- Have you inherited an IRA? A Beneficiary IRA allows you to keep the assets tax-deferred
- Are you self-employed, or do you own a small business? We have a variety of IRAs for small businesses. You can use our easy to use Small Business Selector tool to find a plan that fits your needs.
- Do you have a child earning income? Our IRA for minors is for those under 18 with earned income.
How can E*TRADE from Morgan Stanley help?
Traditional IRA
You may be eligible to make income tax deductible contributions
Earnings potentially grow tax-deferred until you withdraw them in retirement.
Roth IRA1
Tax-free growth potential retirement investing
Pay no income taxes or tax penalties on qualified distributions if you meet certain requirements.
Rollover IRA
Consider rolling over your old 401(k) plan assets to an E*TRADE from Morgan Stanley IRA
Consolidate assets from a former employer’s retirement plan.
SEP IRA
For the self-employed and small businesses
Flexible annual contributions from 0% to 25% of earned income (subject to certain limits).