When it comes to preparing for retirement, Individual Retirement Accounts (IRAs) remain one of the most powerful tools for growing savings, alongside Social Security.
But not all savers are alike. Depending on your tax situation, investment horizon or risk appetite, the right choice can vary.
Rather than reviewing each type of IRA, let's take a look at the most common profiles and the type of account that best suits them, from a retirement planning perspective.
Young professionals at the start of their careers
Are you at the beginning of your working life, with several decades to go before retirement? If you expect your income, and therefore your tax bracket, to rise, a Roth IRA is often a wise choice.
Contributions are after-tax, but earnings and withdrawals at retirement are fully tax-exempt.
This mechanism allows you to "pay your taxes today" at a potentially lower rate, to benefit from an after-tax income tomorrow.
Another advantage is that your contributions (but not the earnings they produce) can be withdrawn at any time, offering flexibility in case of need.
Experienced employee close to retirement
If you're in a high tax bracket today, but anticipate a drop in income after retirement, the Traditional IRA can optimize your situation.
Contributions are tax-deductible in the year they are made, immediately reducing your taxable income.
Earnings are tax-sheltered, and you'll only pay taxes on withdrawals when your tax rate may be lower.
It's the classic "pay taxes later" strategy, effective for maximizing the savings available today.
Experienced investors seeking diversification
Some savers are not content with traditional Stocks, Bonds or Funds, and seek to invest in alternative assets such as Real Estate, physical Gold, shares in unlisted companies (Private Equity) or Cryptocurrencies.
If you want to access these assets within your retirement plan, the Self-Directed IRA is just right for you.
It offers the flexibility of investing in alternative asset classes, while retaining the tax advantages of an IRA.
However, beware that these accounts require rigorous management, a specialized custodian, and a thorough understanding of tax rules to avoid prohibited transactions ("self-dealing") that can trigger taxes and penalties.
Savers with modest or irregular incomes
If your income is low or intermittent, the priority is often to maintain access to retirement savings in spite of everything. IRA rules allow you to contribute as long as you have even a modest taxable income.
In this case, the choice between Roth IRA and Traditional IRA will depend on your immediate tax situation: if you need to reduce your taxes today, opt for the Traditional, but if your rate is already low, a Roth maximizes future benefits.
For couples where only one spouse works, the "Spousal IRA" mechanism (an account opened in the name of the non-working spouse, based on the other's income) ensures that the savings effort is not interrupted.
Self-employed or running a small business
If you're self-employed or run a small business, you're often looking for a compromise between flexibility and high contribution limits.
In this case, a SEP IRA or SIMPLE IRA may be of interest, but to stay with our selection, the Self-Directed IRA may also meet your needs if you want to invest in your own Real Estate or business projects (while strictly respecting the rules).
It offers rare freedom in building your portfolio, while capitalizing on tax advantages.
Key points to remember
Choosing an IRA is more than just comparing technical features, it's a strategic tool that must be integrated into your overall retirement planning, complementing Social Security and other investments.
The Roth IRA favors those betting on higher income, the Traditional IRA benefits those who pay more in taxes today than they will in retirement, and the Self-Directed IRA appeals to savvy investors looking for diversification.
The right account is the one that follows your personal trajectory and that you know how to replenish regularly.
IRAs FAQs
An IRA (Individual Retirement Account) allows you to make tax-deferred investments to save money and provide financial security when you retire. There are different types of IRAs, the most common being a traditional one – in which contributions may be tax-deductible – and a Roth IRA, a personal savings plan where contributions are not tax deductible but earnings and withdrawals may be tax-free. When you add money to your IRA, this can be invested in a wide range of financial products, usually a portfolio based on bonds, stocks and mutual funds.
Yes. For conventional IRAs, one can get exposure to Gold by investing in Gold-focused securities, such as ETFs. In the case of a self-directed IRA (SDIRA), which offers the possibility of investing in alternative assets, Gold and precious metals are available. In such cases, the investment is based on holding physical Gold (or any other precious metals like Silver, Platinum or Palladium). When investing in a Gold IRA, you don’t keep the physical metal, but a custodian entity does.
They are different products, both designed to help individuals save for retirement. The 401(k) is sponsored by employers and is built by deducting contributions directly from the paycheck, which are usually matched by the employer. Decisions on investment are very limited. An IRA, meanwhile, is a plan that an individual opens with a financial institution and offers more investment options. Both systems are quite similar in terms of taxation as contributions are either made pre-tax or are tax-deductible. You don’t have to choose one or the other: even if you have a 401(k) plan, you may be able to put extra money aside in an IRA
The US Internal Revenue Service (IRS) doesn’t specifically give any requirements regarding minimum contributions to start and deposit in an IRA (it does, however, for conversions and withdrawals). Still, some brokers may require a minimum amount depending on the funds you would like to invest in. On the other hand, the IRS establishes a maximum amount that an individual can contribute to their IRA each year.
Investment volatility is an inherent risk to any portfolio, including an IRA. The more traditional IRAs – based on a portfolio made of stocks, bonds, or mutual funds – is subject to market fluctuations and can lead to potential losses over time. Having said that, IRAs are long-term investments (even over decades), and markets tend to rise beyond short-term corrections. Still, every investor should consider their risk tolerance and choose a portfolio that suits it. Stocks tend to be more volatile than bonds, and assets available in certain self-directed IRAs, such as precious metals or cryptocurrencies, can face extremely high volatility. Diversifying your IRA investments across asset classes, sectors and geographic regions is one way to protect it against market fluctuations that could threaten its health.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD Price Annual Forecast: Growth to displace central banks from the limelight in 2026 Premium
What a year! Donald Trump’s return to the United States (US) Presidency was no doubt what led financial markets throughout 2025. His not-always-unexpected or surprising decisions shaped investors’ sentiment, or better said, unprecedented uncertainty.
Gold Price Annual Forecast: 2026 could see new record-highs but a 2025-like rally is unlikely Premium
Gold hit multiple new record highs throughout 2025. Trade-war fears, geopolitical instability and monetary easing in major economies were the main drivers behind Gold’s rally.
GBP/USD Price Annual Forecast: Will 2026 be another bullish year for Pound Sterling? Premium
Having wrapped up 2025 on a positive note, the Pound Sterling (GBP) eyes another meaningful and upbeat year against the US Dollar (USD) at the start of 2026.
US Dollar Price Annual Forecast: 2026 set to be a year of transition, not capitulation Premium
The US Dollar (USD) enters the new year at a crossroads. After several years of sustained strength driven by US growth outperformance, aggressive Federal Reserve (Fed) tightening, and recurrent episodes of global risk aversion, the conditions that underpinned broad-based USD appreciation are beginning to erode, but not collapse.
Bitcoin Price Annual Forecast: BTC holds long-term bullish structure heading into 2026
Bitcoin (BTC) is wrapping up 2025 as one of its most eventful years, defined by unprecedented institutional participation, major regulatory developments, and extreme price volatility.
Best Brokers for EUR/USD Trading
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.