Individual Retirement Account (IRA) FAQs When can you withdraw from an IRA? Generally, you can withdraw from an IRA after 59 1/2. There are also certain situations where you can access funds early without penalty, such as for a first-time home purchase or higher education expenses. What is the difference between an IRA and a 401(k)? The main difference between an IRA and a 401(k) is that 401(k)s are employer-sponsored plans, whereas IRAs are individual accounts. There are also differences in the contribution limits and the available investment options. What are the advantages of an Individual Retirement Account (IRA)? The main advantages of an IRA include accessibility, flexibility, and control over contributions, investments, and situation-considerate withdrawal rules. Additionally, IRAs have tax benefits as contributions are deducted from your taxable income, and growth within the account is tax-deferred until retirement. How much money do you need to start an IRA? The amount you need to start an IRA depends on the type of account that you are opening and the institution where you are setting up your account. Depending on the institution, you can open an IRA with as little as $10 - $50. What are the contribution limits for IRAs? The contribution limits for IRAs in 2024 and 2025 are based on your account type. Generally, traditional and Roth IRAs allow for a maximum contribution of $7,000 per year or $8,000 if you’re 50 or over. For SEP, the limit is much higher at up to 25% of employee compensation or $69,000 in 2024 ($70,000 in 2025), whichever is less. For SIMPLE IRA plans, it is $16,000 in 2024 ($16,500 in 2025). About the Author True Tamplin, BSc, CEPF® Facebook Linkedin Instagram Twitter Youtube True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists. True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics. To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.