Index Growth Roth IRA, SEP, IRA, Traditional IRA

An "index growth Roth IRA" combines the tax-free growth and withdrawals of a Roth IRA with the diversification and low costs of investing in index funds within that account. A Traditional IRA offers tax-deferred growth, with tax deductions in the present, but taxes on withdrawals in retirement. A SEP IRA is a retirement plan for self-employed individuals and small business owners, allowing only employers to contribute on behalf of their employees. All these IRAs focus on building long-term growth to fund retirement, but they differ significantly in their tax treatment and who can contribute.

Roth IRA

• Tax Treatment:Contributions are made with after-tax dollars, but qualified withdrawals in retirement are completely tax-free.

• Growth:The account's earnings and growth are tax-free.

• Best For:Individuals who expect to be in a higher tax bracket in the future or who want tax-free income in retirement.

Traditional IRA

• Tax Treatment:Contributions may be tax-deductible in the current year, allowing for tax-deferred growth.

• Growth:Earnings and growth are tax-deferred until withdrawal in retirement.

• Best For:Those seeking a tax break now, especially if they are in a higher tax bracket today and expect to be in a lower one in retirement.

SEP IRA (Simplified Employee Pension)

• Who Contributes:Only the employer can contribute to an employee's SEP IRA.

• Contribution Limit:The limit is high, up to 25% of an employee's compensation or a total dollar amount, whichever is less.

• Best For:Self-employed individuals and small business owners to save for their own retirement.

Index Funds

• Not a type of IRA:An index fund is an investment vehicle, not a retirement account itself.

• What It Does:It holds a diversified basket of stocks or bonds designed to track a specific market index, such as the S&P 500.

• How It Relates to IRAs:You can hold index funds as your underlying investments within a Roth IRA, Traditional IRA, or even a SEP IRA.