Not All Retirement Accounts Are Created Equal
If you’re self-employed, changing jobs, or just trying to save more efficiently, it can be hard to know which retirement account is right for you. SEP IRAs, Roth IRAs, and Traditional IRAs each offer unique benefits—but choosing the wrong one could mean higher taxes or missed opportunities.
This guide breaks down the key differences so you can match the right plan to your financial goals, income level, and tax strategy.
Traditional IRA: A Time-Tested Retirement Tool
A Traditional IRA (Individual Retirement Account) is a tax-deferred account you can open and fund on your own.
Key Features:
- Contributions may be tax-deductible (depending on income and participation in a workplace plan)
- Investment grows tax-deferred until withdrawal
- Taxes are paid when you take money out in retirement
- Required Minimum Distributions (RMDs) begin at age 73
Best For:
- Individuals looking to reduce taxable income now
- People expecting to be in a lower tax bracket in retirement
2024 Contribution Limit:
- $7,000 ($8,000 if age 50 or older)
Roth IRA: Pay Taxes Now, Withdraw Tax-Free Later
A Roth IRA flips the script. You pay taxes on the money going in—but all future withdrawals are tax-free if rules are met.
Key Features:
- Contributions are not tax-deductible
- Qualified withdrawals (age 59½ + account held 5 years) are 100% tax-free
- No RMDs during your lifetime
- Great tool for generational wealth and tax diversification
Best For:
- Younger savers or anyone expecting to be in a higher tax bracket in retirement
- People who value flexibility and tax-free income later
Income Limits (2024):
- Contributions phase out starting at $146,000 for single filers and $230,000 for married filing jointly
2024 Contribution Limit:
- $7,000 ($8,000 if age 50 or older), combined with Traditional IRA
SEP IRA: Ideal for Self-Employed and Small Business Owners
A Simplified Employee Pension (SEP) IRA is designed for business owners, freelancers, and those with side income.
Key Features:
- Employer-funded only (you fund it as the business owner)
- Contribution limit is much higher: up to 25% of compensation, capped at $69,000 for 2024
- Tax-deductible contributions reduce business income
- Works well alongside a Roth or Traditional IRA
Best For:
- Self-employed individuals or small business owners with variable income
- Entrepreneurs looking for large, tax-deferred contributions
There are no employee contributions, so SEP IRAs are particularly appealing for solo entrepreneurs or businesses with few employees.
Side-by-Side Comparison
| Feature | Traditional IRA | Roth IRA | SEP IRA |
| Tax Deduction | Yes (income limits apply) | No | Yes (for employer) |
| Tax on Growth | Deferred | None | Deferred |
| Tax on Withdrawals | Yes | None (if qualified) | Yes |
| RMDs Required | Yes | No | Yes |
| Income Limits to Contribute | Yes (for deduction) | Yes | No |
| Contribution Limit | $7,000 ($8,000 w/ catch-up) | Same | $69,000 (2024 max) |
| Best Use Case | Reduce taxes now | Tax-free growth later | Maximize self-employed savings |
How to Choose the Right One
Pick a Traditional IRA if:
- You need a tax deduction now
- You expect to be in a lower bracket later
- You’re not eligible for a Roth due to income
Pick a Roth IRA if:
- You want tax-free withdrawals later
- You’re young and have decades of compounding ahead
- You want to avoid RMDs and leave a legacy
Pick a SEP IRA if:
- You’re self-employed or own a small business
- You want to make large pre-tax contributions
- You need a retirement plan that adjusts to your income level
Many people use a combination—like maxing out a Roth IRA while contributing to a SEP through their business. We help clients build blended strategies based on income, age, goals, and risk tolerance.
Let’s Build the Right Retirement Mix for You
Choosing the wrong account—or missing contribution opportunities—can cost you thousands over time. We’ll help you pick the right IRA strategy, make tax-smart contributions, and integrate retirement savings with your full financial plan.
Visit our Retirement Planning Services to learn more, or call (704) 584-9363 to speak with our team. You can also start the conversation through mbwealthadvisors.com/contact/#connect.