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What is an IRA?

Navigate the ins and outs of IRAs

Many savings vehicles are designed to help you prepare for one of the biggest financial goals you'll ever have – retirement. Whether this time is just around the corner or still a few years away, let's take a closer look at how individual retirement accounts (IRAs) might meet your needs.

First things first …

  • Only one person can own and contribute to an IRA. You and your spouse each can have one, but you can't share one.
  • Certain rules must be followed, and you may pay penalties if you take your money out before you reach a certain age.
  • These types of accounts are also given special tax treatment by the IRS. Unlike a savings account at a bank or a regular brokerage account, any growth inside a Traditional IRA is tax deferred.* In a Roth IRA, any growth is distributed tax-free.**

Which IRA makes the most sense for you?

IRAs come in two forms and have different approaches to saving:

  • Traditional IRA – A Traditional IRA is a tax-deferred retirement account. You save today and are taxed when you withdraw the money.* 
  • Roth IRA – In a Roth IRA, you don't get any tax deductions for the contribution today, but can withdraw the assets when you retire without paying taxes.** There's no age limit to contribute.

IRAs have a few additional differences, but your financial advisor can help you determine which savings vehicle best meets your needs.

If I have a 401(k), do I need an IRA?

This isn't an either/or proposition. 401(k)s are pre-tax employer-sponsored retirement plans that are part of an employee's benefits package. Many employers will match your 401(k) contributions up to a certain percentage or dollar amount.

Conversely, you can open an IRA at most investment firms. These accounts are not tied to your employer and are transferable between institutions. IRAs may also allow you more flexibility in your investment choices, since you're able to choose the firm you invest with as well as the types of investments you prefer.

Consider holding your IRA at Edward Jones

Not only can you expect world-class service, but you also can:

  • Automate your contributions
  • Set up direct deposit from any other account – even if it's held at another financial institution
  • Reinvest dividends into your IRA
  • View required minimum distributions (RMDs) on your monthly statement
  • Simplify record keeping

Contact Us Today

To learn more about IRAs in general or discuss holding your IRA at Edward Jones, schedule a conversation with your local financial advisor.

Important Information:

*Early withdrawals are subject to ordinary income tax and a 10% penalty if you take a distribution before reaching age 59½.

**Earnings distributions from a Roth IRA may be subject to taxes and a 10% penalty if the account is less than five years old and the owner is under age 59½.

Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation. This content should not be depended upon for other than broadly informational purposes. Specific questions should be referred to a qualified tax professional.

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    Do I need an IRA if I have a 401(k)?

    In many cases, you don't need to choose one over the other – we see value in exploring if an IRA may be right for you even if you already contribute to a 401(k).

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