Types of Retirement Accounts on Composer

We currently offer Traditional IRAs and Roth IRAs. While both serve the same purpose of aiding retirement savings, they differ significantly in their tax treatment, withdrawal rules, and eligibility criteria.

On Composer, you’re able to open one of each account type. We’re unable to open accounts in the following states: Washington DC, Massachusetts, Illinois, and North Dakota.

The annual contribution limits for both Traditional and Roth IRAs are identical. In 2023, individuals are allowed to contribute up to $6,500 per year, or $7,500 for those aged 50 or older, which includes a $1,000 "catch-up" contribution. In 2024, individuals are allowed to contribute up to $7,000 per year, or $8,000 for those aged 50 or older, which includes a $1,000 "catch-up" contribution. It's important to note that these limits apply to the total contributions across all IRAs you may have, not per account. These limits are subject to periodic updates, so staying informed about the current limits is crucial. Contribution allowances may also be impacted by your spouse’s retirement accounts, if filing jointly.

Traditional IRAs

Traditional IRAs offer tax-deferred growth, meaning the contributions you make may be tax-deductible, reducing your taxable income in the contribution year. Almost anyone with earned income can contribute to a Traditional IRA. There are no income limits, making it accessible to a broad range of earners. However, the key factor is the tax deductibility of contributions.

You can read more about Traditional IRAs here:

https://www.irs.gov/retirement-plans/traditional-iras

Roth IRAs

Roth IRAs offer tax-free growth and withdrawals. Contributions to a Roth IRA are made with after-tax dollars, meaning there's no tax deduction for the contribution year. However, the advantage lies in the fact that both the contributions and the earnings can be withdrawn tax-free after age 591⁄2, provided the account has been open for at least five years.

You can read more about Roth IRAs here: https://www.irs.gov/retirement-plans/roth-iras.