There are several types of IRAs including the traditional IRA (the deductible IRA and deductible spousal IRA), the nondeductible IRA, and the Roth IRA. An IRA can be set up with an insurance company, bank, or investment company.
All earnings on traditional IRAs are tax-deferred, meaning taxes on earnings are not paid until you withdraw your money. You must begin making withdrawals from your IRA by age 70 ½.
- Deductible IRA: If you (or you and your spouse) are employed but not covered by an employer-sponsored retirement plan, you both may contribute up to the maximum each year and deduct your contribution from your taxable income. The contribution limit rose to $6,000 in 2019 for those under age 50. Those 50 and over can make an extra $1,000 catch-up contribution. In a one-income family, the unemployed spouse also may contribute to a spousal IRA.
Additional information about contribution limits on traditional IRAs, nondeductible IRAs and Roth IRAs are available at the IRS website.