Traditional IRA

• Traditional IRAs have been around since 1975. Often, the funds contributed to traditional IRAs are tax deductible, and the earnings on the account are tax deferred. These features make them attractive vehicles for people looking for a long-term saving plan. The plan works by allowing individuals with earned income to put away money as long as they do not reach age 70 1/2 years old by the end of the year. The funds will only be taxed when the money is withdrawn from the account. The intent is to tax the earnings when the person may be in a lower tax bracket. The law outlines what the eligibility stipulations are related to income and other criteria.
  
  

Roth IRA

• The Taxpayer Relief Act of 1997 authorized the creation of Roth IRAs, which allows individuals to contribute after-tax dollars into an IRA. This IRA is named after Senator William Roth who sponsored the legislation. Like traditional IRAs, the individual must have earned income, and the earnings within the account can grow tax free. Although there is no age limit for establishing a Roth account, the person must follow the modified adjusted gross income (MAGI) rules regarding income limits.
  
  

SEP IRA

• Simplified employee pension (SEP) IRAs are set up by self-employed individuals and small business owners to create retirement accounts in the name of their employees. Self-employed people do not have to have employees to take advantage of this plan; however, if they do have workers, they must provide similar benefits to all employees. Contributions to SEP IRAs can be invested the same as any IRA. Employers are expected to follow certain rules governing contributions that can be made on the behalf of employees. Self-employed individuals must also follow specific guidelines.
  
  

Simple IRA

• Simple IRAs are a type of employee pension plan. It operates like a 401(k) plan; however, the allowable contributions are lower than most other plans. It is treated differently than other IRAs. Under the law, employees are permitted to put money into the employer-sponsored plan for retirement. The funds are tax deductible and can compound without being taxed. Social security, Medicare, and FUTA (Federal Unemployment Tax Act) must be paid on the contributions made to the account.
  
  

Self-Directed IRA

• Self-directed IRAs allow a qualified trustee or custodian to invest the account's funds on the part of the account owner. The trustee is also responsible for keeping records regarding the assets and transactions related to the account. The trustee/custodian must not only distribute statements but also provide information and other assistance to help their clients understand the laws and rules pertaining to the dealings that are made. Unlike other IRAs, the assets of self-directed IRAs can be invested in a wide variety of financial instruments, including stocks, bonds, real estate, tax liens and franchises just to name a few.