The IRA is the retirement savings tool most Americans open at some point, and also the one most commonly misunderstood. Depending on which type you open and when you contribute, the tax treatment changes, the contribution limits shift, and the withdrawal rules branch in different directions. For HR teams communicating retirement benefits, the IRA is important context: employees often use an IRA alongside or instead of a 401(k), and understanding how the two interact helps them make better total retirement decisions. For small-business HR teams, SEP and SIMPLE IRAs are sometimes the right plan design when a full 401(k) isn't feasible.
The Four Main IRA Types Traditional IRA: contributions may be tax-deductible depending on income and whether the contributor has an employer plan. Earnings grow tax-deferred, and withdrawals in retirement are taxed as ordinary income. Required minimum distributions begin at age 73 (rising to 75 in 2033).
Roth IRA: contributions are after-tax, so there's no immediate tax deduction. Earnings grow tax-free, and qualified withdrawals in retirement are entirely tax-free. No required minimum distributions during the original owner's life.
SEP IRA: a simplified employer-sponsored plan for self-employed and small-business owners, with high contribution limits (25 percent of compensation up to $70,000 for 2025).
SIMPLE IRA: an employer-sponsored plan for businesses with 100 or fewer employees, combining employee salary deferrals with required employer contributions.
2026 Contribution Limits Traditional and Roth IRA: $7,000 for individuals under 50; $8,000 with the catch-up for those 50 and older. Roth IRA phases out at higher income levels ($150,000 to $165,000 for single filers, indexed annually). SEP IRA: up to 25 percent of compensation or $70,000 for 2025, whichever is less. SIMPLE IRA: $16,500 employee deferral, with a $3,500 catch-up at age 50, plus employer contributions.
Limits are updated annually; check the IRS annual adjustment announcements.
Can You Contribute to Both a 401(k) and an IRA? Yes, but the tax deduction for a Traditional IRA may phase out based on income if you or your spouse is covered by a workplace retirement plan. Roth IRA eligibility also phases out at higher incomes but isn't affected by workplace plan participation.
Where Employers Use SEP and SIMPLE IRAs SEP IRAs fit self-employed individuals and small business owners who want high contribution limits without the administrative overhead of a 401(k). SIMPLE IRAs fit growing small businesses that want to offer an employer-sponsored plan with less complexity than a 401(k) but more structure than a SEP.
Both can be set up relatively quickly, often with financial institutions that handle most of the compliance work. Neither allows Roth contributions (that's only for 401(k)s, Traditional IRAs, and Roth IRAs).
Communicating IRA Options to Employees Most employees don't maximize their tax-advantaged retirement savings because they don't understand the interaction between employer plans and IRAs. Include IRA basics in benefits enrollment materials and in financial wellness content.
For small employers offering SEP or SIMPLE IRAs, treat the plan as part of the broader total rewards conversation. Reference the IRS SIMPLE IRA guidance and the SEP IRA guidance for current rules. Pair IRA education with 401(k) , compensation , and employee benefits communications.
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