Individual Retirement Accounts (IRAs)

An Individual Retirement Account (IRA) is a popular retirement savings option that offers tax advantages to individuals. It allows you to contribute funds to a designated account, which can then be invested in various financial instruments such as stocks, bonds, mutual funds, or even real estate. Here are three common types of IRAs:

1. Traditional IRA

A Traditional IRA is a retirement account where contributions are typically made with pre-tax income, meaning you can deduct the contributions from your taxable income in the year they are made. The investments within the account grow tax-deferred, and you only pay taxes when you withdraw the funds during retirement. This type of IRA is suitable for individuals who expect to be in a lower tax bracket during retirement.

2. Roth IRA

A Roth IRA, on the other hand, is funded with after-tax income. You do not get an immediate tax deduction for contributions made to a Roth IRA, but the investments within the account grow tax-free. The real benefit of a Roth IRA is that qualified withdrawals during retirement are tax-free, including both contributions and earnings. This makes it an attractive option for individuals who anticipate being in a higher tax bracket during retirement or desire tax-free income in their later years.


A Simplified Employee Pension (SEP) IRA is designed for self-employed individuals or small business owners. It allows employers to make tax-deductible contributions to their own retirement account and to their employees’ accounts. SEP IRAs offer higher contribution limits compared to Traditional or Roth IRAs, making them a valuable tool for those with higher income and self-employment income.

Consulting with a financial advisor or tax professional can provide personalized guidance on which type of IRA is most suitable for your specific financial situation and retirement goals. Contact Ocean City Financial Group today to learn more