IRA Guide for Seniors

What Is an IRA?

An Individual Retirement Account (IRA) is a personal retirement savings account with tax advantages. The government created IRAs to encourage people to save for retirement. Depending on the type of IRA, you might receive a tax benefit when you contribute or when you withdraw money.

For 2026, the IRS allows most people to contribute up to $7,500 per year to an IRA. If you’re 50 or older, you get a little extra room thanks to the “catch-up contribution” provision, bringing your limit up to $8,600. And if you haven’t met your contribution limit, you can still contribute for the 2026 tax year right until April 15, 2027.1

IRA vs. Savings Account

An IRA differs from a regular savings account because of how your money is taxed. Investments in an IRA ‌can grow without you paying taxes on the earnings each year. With a Roth IRA, qualified withdrawals can also be tax-free.

IRA vs. 401(k)

An IRA also differs from a 401(k). An employer typically sponsors a 401(k), while you open and manage an IRA yourself. You can have both types of accounts, and it can be beneficial, especially since contributions to your 401(k) don’t count for your IRA.

The Six Main Types of IRAs

IRAs come in several types, and each one works a little differently. Traditional and Roth IRAs are the most common types for individual retirement savings, but the other options may be useful depending on your work and financial situation.

• Traditional IRA: Contributions may be tax-deductible, and you pay taxes when you withdraw the money.
• Roth IRA: You contribute money after paying taxes and can make qualified withdrawals tax-free.
• SEP IRA: Designed for self-employed workers and small business owners.
• SIMPLE IRA: A retirement savings plan for small businesses and their employees.
• Rollover IRA: Holds money moved from an old 401(k) or another eligible employer retirement plan.
• Self-Directed IRA (SDIRA): Allows you to invest in alternative assets, such as real estate or certain precious metals.

Traditional IRA: The Classic Option

The Traditional IRA is the original IRA, and you likely already have one. With this IRA, you put money in before taxes, which can reduce the taxes you pay for every year that you contribute. It’s an ideal option if you expect to be in a lower tax bracket in retirement, since you’ll likely pay lower taxes.

Each year your money grows, you won’t owe taxes on it. However, you will pay taxes on the money as ordinary income when you withdraw it.

Traditional IRAs also have required minimum distributions (RMDs), which means you’ll have to start withdrawing money at a certain age. This can affect your overall tax bill and, for some retirees, Medicare-related costs.

Pros for Seniors

• Reduces taxable income if you’re still earning and contributing
• No taxes on investment gains until you withdraw money
• No income limit for contributions
• Widely available (offered by most banks, credit unions, and brokerage firms)

Cons for Seniors

• Required Minimum Distributions (RMDs) at either age 73 or 75, depending on your year of birth2
• If you miss an RMD, you pay a 25% penalty on the missed amount.3
• Withdrawals before age 59½ face a 10% penalty.

Roth IRA: The Tax-Free Powerhouse

A Roth IRA works differently from a Traditional IRA. You contribute money after taxes, so you won’t get a tax deduction right away. However, you won’t pay taxes when you withdraw from your Roth IRA. You also don’t have to take required minimum distributions during your lifetime.

If you’re a senior on a fixed income, this is a major advantage. Since your Roth IRA withdrawals don’t count as taxable income, they won’t push you into a higher tax bracket or drive up your Medicare premiums.

However, Roth IRAs have income limits, so you won’t qualify if you’re a single filer earning over $153,000 or a married filer earning over $242,000. 4

Pros for Seniors

• No required minimum distributions (RMDs) during your lifetime
• Withdrawals don’t count as taxable income
• You can withdraw original contributions at any time without incurring penalties or taxes
• Heirs who inherit a Roth IRA continue to benefit from tax-free growth

Cons for Seniors

• No upfront tax deduction
• Income limits prevent some higher earners from contributing directly
• Lower contribution limits than 401(k)s
• Converting a Traditional IRA or 401(k) to a Roth IRA can mean higher taxes

SEP IRA: For Seniors Who Are Still Self-Employed

including freelancers and small business owners. It can be useful for older adults who continue working past the typical retirement age.

The biggest benefit of a SEP IRA is its contribution limits: for 2026, you can contribute either 25% of your self-employment income or $72,000, whichever amount is lower.5 That’s much higher than the standard IRA limit, so it helps keep more of your income from taxes.

Pros

• Higher contribution limits than Traditional or Roth IRAs
• Simple to set up
• Contributions are fully tax-deductible to the business
• SEP contributions don’t count toward your regular IRA contribution limit; you can fund both in the same year

Cons

• RMDs starting at age 73 or 75, depending on your birth year
• No catch-up contributions for those 50 and older
• If you have employees, you must contribute the same percentage of compensation for all eligible staff

SIMPLE IRA: The Small-Business Retirement Plan

SIMPLE stands for Savings Incentive Match Plan for Employees, and it’s built for businesses with 100 employees or less. It may be useful if you have a small business and want to offer a retirement plan, or if you work for an employer that offers one.

For 2026, employees can contribute up to $17,000, or $21,000 for those age 50 and older.6 Employers must contribute to the IRA, either by matching contributions up to 3% of an employee’s salary or a flat 2% contribution for all eligible employees.

Like traditional IRAs, SIMPLE IRAs require you to take required minimum distributions once you reach the required age. These withdrawals can increase your taxable income and may affect how much you owe in taxes.

Pros for Seniors

• Easier and cheaper to administer than a 401(k)
• No income limit for employee contributions
• Mandatory employer contributions boost total savings
• Allows small business owners to save for retirement while offering employee benefits

Cons for Seniors

• The early withdrawal penalty in the first two years of the plan is 25%.7
• After two years, rollover options open up, but early rollovers to a Traditional IRA or 401(k) are not allowed
• RMDs start at age 73 or 75

Rollover IRA: Moving Old 401(k) Savings

A Rollover IRA is an IRA that holds money moved from an employer-sponsored retirement plan, such as a 401(k) or 403(b). When you complete the rollover correctly, you can generally move the money without paying taxes or penalties at the time of the rollover.

Rollover IRAs can be helpful if you have retirement savings from a previous employer. Moving old accounts into one IRA may make your finances easier to manage and give you more investment options.

Pros

• Keeps your money tax-deferred
• Opens up a much wider range of investment options
• Simplifies finances by combining multiple old accounts into one, making management simpler
• Can be rolled into a self-directed IRA if you want physical assets like gold

Cons

• Rollovers must be done correctly to avoid unnecessary taxes and penalties.
• 60 days to deposit it into a retirement account if the money is paid to you first
• Rollover IRAs have required minimum distributions when you reach a certain age

Self-Directed IRA: Beyond Stocks and Bonds

A Self-Directed IRA (SDIRA) is a Traditional or Roth IRA that may allow you to invest in alternative assets that aren't typically available through a standard brokerage IRA. Depending on the provider, these investments may include real estate, private companies, and certain precious metals.

A gold IRA is one type of SDIRA that can hold certain physical gold coins and bars. The gold must meet IRS requirements and be stored with an approved custodian and depository.8

Companies such as Goldco and Augusta Precious Metals specialize in helping consumers set up and manage gold IRAs. Before choosing a provider, compare fees, storage costs, customer service, and the services included with your account.

Pros

• Investment choices beyond stocks, bonds, and mutual funds
• Physical gold has historically served as an inflation hedge over long time horizons
• A Traditional or Roth SDIRA follows the tax rules of the corresponding type of IRA

Cons

• Higher fees than standard IRAs
• Selling alternative investments, such as physical gold or real estate, can take longer than selling a stock or mutual fund
• Has higher risk of fraud and other investment-related problems

IRA Types: Side-by-Side Comparison

Here’s a summary of all six IRA types to help you compare options:

How to Choose the Right IRA

The right IRA for you depends on your income, work status, tax situation, and retirement goals. If you’re still working, a Traditional IRA may offer tax benefits now, while a Roth IRA may provide tax-free qualified withdrawals later. A financial advisor or tax professional can help you compare your options.

You can also have more than one type of IRA. For example, you can have both a Traditional IRA and a Roth IRA, but your combined contributions to those accounts must stay within the annual IRA contribution limit. SEP and SIMPLE IRAs have separate contribution rules.

For Adult Children and Caregivers: A Practical Checklist

If you’ve stepped in to help a parent manage their retirement accounts, here are the most important things to address:

1. Locate every retirement account. Your parent may have forgotten about old 401(k)s from previous employers. Use the Department of Labor’s Abandoned Plan Search tool to track down missing accounts.
2. Make sure that RMDs are being taken correctly. If your parent misses an RMD, they face a 25% penalty. Since the withdrawal doesn’t happen automatically, someone needs to take care of it every year.
3. Review beneficiaries. Outdated beneficiaries are one of the most common and costly estate-planning oversights, since beneficiary designations override a will.
4. Understand the tax bracket. Knowing your parent’s income level helps determine whether a Roth conversion could reduce future taxes and RMD burden.
5. Consider simplifying. It’s hard to manage multiple old accounts at different institutions, so it may be a good idea to consolidate funds with a Rollover IRA for easier oversight.
6. Consult the right professionals. If you have account questions, contact the custodian directly. If you need tax strategy, consult a CPA. For estate and legal matters, invest in an elder law attorney.

Conclusion

An IRA can help you save for retirement, manage your taxes, and plan for your loved ones. Understanding your IRA and how it fits into your overall financial plan can help you feel more confident about the years ahead.

If you’re reviewing your own accounts or helping a parent get organized, start with the basics. Make sure your required minimum distributions are on track, your beneficiary information is up to date, and you understand your options, including whether a Roth conversion may make sense for you.

Even small steps can give you greater peace of mind. If you’re unsure about your options, consider talking with a qualified financial advisor or tax professional.