This is the fourth post in our Retirement Investing 101 series written by Amanda Smith, Client Services Specialist at CESI. Check out Part 1 or continue on to Part 5.

We have two more savings vehicles to review where you can really maximize your retirement savings so that you can do those extra things (traveling? spoiling the grandkids, maybe?) you long for when you are older. These vehicles are called an IRA and a Roth IRA. IRA stands for “Individual Retirement Account”. IRAs cannot be joined with anyone, even your spouse, so you’ll never be able to open a joint IRA. Many of the same principles that apply to the 401k apply to the IRA and Roth IRA; however, the contributions are different.

An individual under the age of 50 may contribute up to $5,500, and someone age 50 or older may contribute $6,500 for the tax year 2013 for both IRA and Roth IRA. Anyone, regardless of income, can contribute toward an IRA but Roth IRAs have specific income limits for contributors. (Note: to view image at full size, you may have to click it once, wait for new screen to refresh, then click it again – at this point it should be full size.)

“Full amount,” “reduced amount,” or “zero” simply refer to the amount the individual can contribute to his or her IRA – full amount being $5,500 or $6,500 (depending on age), a reduced amount being something less than those amounts, and zero meaning the individual does not qualify to contribute to an IRA. These limitations are different for each individual depending upon his or her filing status.

Another special part of contributing to an IRA or Roth IRA is the wide range of investment options. The investment options are limitless within these accounts but are subject to broker and fund fees, whereas investing within a 401k is limited to employer chosen options.

Continue on to Part 5.

Source: http://pages.shanti.virginia.edu/Pancakes4Parkinsons/files/2012/05/piggy-bank.jpg