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Best Business Checking Accounts

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

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If you’re starting a business, one of the first steps to take is opening a business checking account. Being able to make transactions and deposit funds is an essential component of actually doing business, after all.

Every business owner will need different things from their checking account, based on factors like how many transactions you make per month and what kind of minimum balance you can manage. However, these are the basic business checking account features you need to look for:

  • Low transaction fees
  • Low minimum opening deposit and minimum balance requirements
  • High interest rates
  • Access to physical bank branches
  • Extensive ATM network

Since finding the right account can be a chore, we’ve compiled a round-up of the best business checking accounts that are currently available. Every month, we review business checking account rates using data from another LendingTree company, DepositAccounts.com, a database of offerings at more than 17,100 banks and credit unions. We sorted the products by APY, then eliminated institutions that were not available nationwide and did not meet the five criteria above.

To make the cut, the account needed to have minimal fees, a minimum of 50 transactions per month and the option to waive monthly fees if certain requirements are met. While offering an APY wasn’t a requirement, it was taken into consideration when developing this list.

Best Business Checking Accounts of January 2021

Account NameMinimum Balance to Waive Monthly Fee Number of Transactions Per Month with No ChargeAPY

BlueVine Business Checking

N/A

Unlimited1.00%

Axos Bank Business Interest Checking

Average daily balance of $5,000

Up to 500.81%

Radius Bank Tailored Checking

Average monthly balance of $5,000

Unlimited0.10%

TIAA Bank Business Checking

Daily balance of $5,000

First 200 itemsNone

First Citizens Bank Basic Business Checking

None, but must enroll in paperless statements

Up to 175 itemsNone

Capital One Spark Business Unlimited Checking

Prior 30- or 90-day average account balance of $25,000

UnlimitedNone

nbkc Bank Business Account

N/A

UnlimitedNone

Bank of America Business Advantage Checking

Average monthly balance of $15,000

500None

PNC Bank Business Checking

Average monthly collected balance of $500

Up to 150 transactionsNone

BlueVine Business Checking

BlueVine Business Checking

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on BlueVine’s secure website

Internet-based BlueVine is currently offering the most competitive business checking account out there, with a generous APY and no fees. Currently, BlueVine’s Business Checking account doles out an APY of 1.00% on balances up to $100,000.

Customers of BlueVine’s Business Checking account will also enjoy the account’s minimal fee model, which features no monthly service fees, unlimited transactions with no monthly balance required, no ATM fees at MoneyPass ATMs nationwide and no NSF fees. BlueVine’s banking services are provided by The Bancorp Bank.

  • Transaction fees: Unlimited free transactions
  • Monthly fee: $0
  • ATM fees: None at MoneyPass ATMs nationwide
  • Number of physical branches: None

Axos Bank Business Interest Checking

Business Interest Checking

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on Axos Bank’s secure website

Member FDIC

Axos Bank offers one of the few business checking accounts with minimal fees and a competitive APY, making it one of the best choices out there. Axos Bank’s Business Interest Checking account features an APY on account balances ranging from $0 to $5 million, with balances up to $50,000 earning our listed rate.

There is a $100 minimum required to open an account, and although the bank does charge a monthly maintenance fee of $10, you can waive the fee if you maintain a minimum average daily balance of $5,000. Other attractive features of the Axos Bank Business Interest Checking account are:

  • Transaction fees: Up to 50 items per month, $0.50 after that
  • Monthly fee: $10, can be we waived with minimum average daily balance of $5,000
  • ATM fees: Unlimited domestic reimbursements
  • Number of physical branches: Online only

Radius Bank Tailored Checking

Tailored Checking

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on Radius Bank’s secure website

Member FDIC

Radius Bank is another online option that offers a great business checking account. Radius Bank’s Tailored Checking account features an APY of 0.10% on balances over $5,000. Like Axos, there is a $10 monthly maintenance fee, which can be waived if you maintain a minimum monthly balance of $5,000. There is a minimum deposit of $100 required to open an account, but no minimum balance requirement after that.

In addition to earning interest, other features of the Radius Bank Tailored Checking account worth noting are:

  • Cash back: Receive up to 1% cash back when you shop in certain categories
  • Transaction fees: Unlimited transactions
  • Monthly fee: $10, but can be waived with average monthly balance of $5,000
  • ATM fees: Unlimited ATM reimbursements, excluding international exchange fees)
  • Number of physical branches: One in Boston, otherwise it’s all online

TIAA Bank Business Checking

Small Business Checking - 1st Year Intro Rate

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on TIAA Bank’s secure website

Member FDIC

TIAA Bank offers a number of business checking accounts, ranging from options geared specifically to small businesses, to others tailored for non-profits. The standard Business Checking account is a solid product that ticks a number of boxes for a great, low-fee account. It’s worth noting that there’s a minimum deposit of $1,500 required to open an account, relatively higher than other business checking accounts out there.

It’s worth noting that there’s a minimum deposit of $1,500 required to open an account, relatively higher than other business checking accounts out there. Other business checking accounts offered by TIAA Bank that are worth exploring, depending on your business’s needs, include the Small Business Checking account, which is made for sole proprietors and single owner LLCs and earns a modest APY, and the Business Analysis Checking account.

The TIAA Bank Business Checking account features the following:

  • Transaction fees: First 200 items per month, $0.25 each after that
  • Monthly fee: $14.95, but can be waived with balance of $5,000
  • Number of physical branches: 144

First Citizens Basic Business Checking

Basic Business Checking

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on First Citizens Bank (NC)’s secure website

First Citizens Bank, which has a branch network sprawling across the Southeast and Southwest, and also offers online banking services. First Citizens promotes its Basic Business Checking account as a “favorite starter account” for businesses because of its simplicity and affordability. It’s one of the few banks on this list that doesn’t have any monthly maintenance fees, regardless of the account’s balance, as long as you opt out of paper statements.

With a low minimum deposit requirement of just $100 to open an account and no minimum balance requirements after that, it’s also one of the more accessible checking accounts for businesses that are not flush with cash from the get-go. While the First Citizens Basic Business Checking account doesn’t offer many bells and whistles, it’s a low-fee account with attractive features similar to those offered at big financial institutions:

  • Transaction fees: Up to 175 free transactions per month, $0.50 each after that
  • Monthly fee: None
  • ATM fees: Free access to First Citizens Bank ATMs
  • Number of physical branches: Over 1,000 branches in Arizona, California, Colorado, Florida, Georgia, Kansas, Maryland, Missouri, New Mexico, North Carolina, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, Wisconsin, West Virginia and Wisconsin

Capital One Spark Business Unlimited Checking

Spark Business Unlimited Checking

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on Capital One’s secure website

The standout feature of Capital One’s Spark Business Unlimited Checking account is its unlimited transactions, a relatively rare feature for business checking accounts at the other big banks.

The Spark Business Unlimited Checking account requires a pretty hefty balance to waive the monthly service fee of $35. Capital One, however, does offer free overdraft protection with a linked small business deposit account. Other noteworthy features offered by the Capital One Spark Business Unlimited Checking account include:

  • Transaction fees: Unlimited transactions
  • Monthly fee: $35, can be waived with prior 30- or 90-day average account balance of $25,000
  • ATM fees: Free access to 55,000 Allpoint ATMs
  • Number of physical branches: More than 400

nbkc bank Business Account

Business Account

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on nbkc bank’s secure website

Member FDIC

The nbkc bank Business Account is a no-frills business checking account with competitive incentives, including unlimited transactions. There is no minimum required to open an account, and with no minimum balance requirements, this is a checking account that’s especially accessible for businesses just starting out.

For those who want more from their nbkc bank Business Account services, the bank also offers add-on options for an additional cost, like the Desktop Deposit, which gives you unlimited deposits from your office and unlimited account support. Drawbacks of the nbkc bank Business account include only having a handful of physical bank branches in Kansas and Missouri. However, nbkc primarily presents itself as an online-only bank.

Other standout features of the nbkc bank Business account include:

  • Transaction fees: Unlimited transactions
  • Monthly fee: None
  • ATM fees: Free access to 34,000 MoneyPass ATMs and up to $12 monthly refunds for any ATM’s fees
  • Number of physical branches: 4 total in Kansas and Missouri (it positions itself as an online bank)

Bank of America Business Advantage Checking

 Business Advantage Checking

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on Bank Of America’s secure website

Bank of America (BoA) offers a number of business checking accounts, but its Business Advantage Checking account in particular has a number of competitive features. This account does have a relatively steep monthly fee of $29.95, but it gives you several options to avoid that fee. There is a minimum deposit of $100 required to open the account.

One perk worth highlighting is that you’ll also receive an additional Business Advantage Checking account and an additional Business Advantage Savings account at no extra charge.

Other standout features of the Bank of America Business Advantage Checking account include:

  • Transaction fees: Up to 500 free transactions per month, $0.45 after that
  • Monthly fee: $29.95, which can be waived in several ways, including maintaining an average monthly balance of at least $15,000, maintaining a combined average monthly balance in linked BoA accounts of $35,000, or spending $2,500 in net new purchases on a BoA business credit card
  • ATM fees: Free access to Bank of America ATMs
  • Number of physical branches: Over 4,000

PNC Bank Business Checking

Business Checking Plus

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on PNC Bank’s secure website

PNC Bank’s Business Checking account is great for budding businesses interested in the checking essentials with minimal fees. There is a minimum deposit of just $100 required to open an account, and the $10 monthly maintenance fee is waived by meeting certain requirements, including maintaining an average, monthly collected balance of just $500.

There are drawbacks of the PNC Bank Business Checking account, though. PNC itself has a relatively nonexistent footprint in the Western region of the U.S., so if you live in that region and want the convenience of a bank with brick-and-mortar locations, you’ll want to take that into consideration.

Other noteworthy features of the PNC Bank Business Checking account are:

  • Transaction fees: Up to 150 free transactions monthly, $0.50 each after that
  • Monthly fee: $10, waived if you maintain a balance of $500, use a linked PNC business credit card to make a minimum of $500 in eligible purchases or Maintain a linked PNC Merchant Services account and generate a minimum of $500 in qualifying monthly processing deposits
  • ATM fees: Free access to 18,000 PNC and partner ATMs
  • Number of physical branches: 2,300 in Alabama, Delaware, Washington, DC, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Maryland, Michigan, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia, West Virginia and Wisconsin

Business checking accounts vs. personal checking accounts

At first glance, business checking accounts versus personal checking accounts might seem fairly similar. But if you take a closer look, you can understand the key differences. While every account has its differing features, personal checking accounts usually have:

Meanwhile, business checking accounts often have:

  • Monthly service fees or minimum balance requirements to waive them
  • Lower APYs
  • Extra fees for actions ranging from having an excess of transactions to depositing cash
  • More documentation required to open an account
  • The option to order employee debit cards

Why you need a business checking account

If you’re a business owner, you might be wondering why you even have to open a checking account separate from your personal one. After all, personal checking accounts tend to have lower fees, higher APYs and better features. Why not just skip opening one and — when it comes to your checking accounts — mix business with pleasure?

There are several reasons why you should keep your work and personal checking accounts from co-mingling. First and foremost: If you operate your business as a legal entity that is separate from you – say, as an LLC – you’re legally required to keep your personal and business finances separate. Opening a business checking account is the simplest way to do that.

Another reason why you need a checking account for your business is to protect yourself. If you have structured your business entity as a corporation or an LLC, and you have a separate checking account for your business, you and other shareholders’ personal assets are not likely to be seized for damages your company is obligated to pay when filing for bankruptcy.

Benefits of a business checking account

There are a number of other benefits associated with maintaining a business checking account, aside from the obvious ones of following the law and protecting your personal assets. Those benefits can include:

  • Keeping your business records organized. This will make it easier to track your business’s profitability and assess its performance.
  • Simplifying your taxes. By keeping your personal and business checking accounts separate, it will be easier for you to file your taxes accurately and avoid penalties from the IRS. Also, it will make it easier for you to deduct business expenses from your taxes.
  • Being able to accept credit cards as a form of payment, either by setting up a merchant system or credit acceptance system.
  • Being able to allow your employees to use the business checking account.

What you need to open a business checking account

When opening a business checking account, you need more than just a spiffy company name and logo. You’ll typically be required to present the following documents:

  • Employer Identification Number (EIN) or Social Security number if it’s a sole proprietorship
  • Your business’s formation documents
  • Ownership agreements
  • Business license

Opening a business checking account might be one of the first, big business decisions you will make as an entrepreneur. Make sure it’s an informed decision: Do your research, come with questions and be confident about the account you are opening before signing on the dotted line.

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10 Ways to Invest Outside of Your 401(k) in 2021

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It may not have not been reviewed, commissioned or otherwise endorsed by any of our network partners or the Investment company.

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So you’ve got plans to max out your 401(k) and your emergency fund is cash-flush. What next?

You have plenty of options, many of which we’ve listed below. Wherever you put your money, remember that each type of investment comes with drawbacks. You should understand your risk tolerance and be comfortable with the potential pitfalls involved before getting started with a new investment. Asset diversification is a way to offset the potential risks — do not put all your eggs in one basket. If you are looking to diversify your assets, here are 10 ways to invest outside a 401(k). We’ve put them in order (roughly) of how complicated it is to get started with these investment strategies.

Upgrade your savings

Stashing your extra money in a certificate of deposit (CD), high-yield savings account, or money market account might be the least risky investment you can make in 2021.

Most accounts are insured by the Federal Deposit Insurance Corporation, a government agency, for up to $250,000. The risk with these accounts is you might not earn enough interest on your deposits to outpace inflation. If you choose a CD, you usually can’t access your money until the term ends without paying a hefty fee, so it’s probably not a good idea to lock all your savings into a five-year CD account.

You can read our reviews on CDs, online-bank savings accounts, and money market accounts with the highest yields and best perks.

Best for: Conservative investors who are not comfortable with investing in the market and those who need a place to save their emergency fund.

Get an automated micro-investing app

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Small savings add up quickly.

A wave of micro-investing apps have allowed users to invest spare money in small amounts in selected exchange traded funds (ETFs), which are securities that track a basket of stocks, bonds, commodities, or indexes — like the S&P 500 index, for instance. You can often select a ready-made portfolio depending your risk tolerance and invest as little as $5 each day.

Take Acorns as an example: It automatically invests a small amount of your money daily, weekly, or monthly. One of Acorns’ interesting features is rounding up your purchases to the nearest full dollar amount and makes the change available for you to invest.

Let’s say you used a credit card to buy a cup of coffee for $2.75. You can choose to invest the 25 cents on the app, or Acorns will invest the change for you if you elect automatic-roundup investments. It’s free to open an Acorns account. The app charges $1 per month if your balance is under $5,000, or 0.25 percent per year if your balance is $5,000 or more.

We’ve reviewed four micro-investing apps. Read more about their features here.

One thing to note: These apps target investors saving small amounts of cash, so you want to make sure the fees don’t eat into your returns. As a reference, the average ETF fee is 0.24%, and the average for target-date funds is 0.71%, according to Morningstar. So, it really doesn’t make much sense for you to pay $12 a year if you only invest $200 a year through Acorns — the fee would be a sky-high 6%.

Best for: People with cash sitting idle in their checking account. And those who have the best intention to save but struggle to get over the emotional barrier. The automated apps help you save spare money and potentially grow it through investing.

Open a Roth IRA

Consider opening a Roth IRA if you have maxed out your 401(k) or you are simply not happy with the investment choices in your plan.

It’s a more flexible retirement investment vehicle, especially for early-career professionals, than a 401(k), according to financial planners. With a Roth, you save after-tax dollars. Money invested in a Roth grows tax-free, and you can withdraw your original contributions — but not the earnings — before retirement without tax consequences or penalty. Many parents also make it a piece of their college savings plan, thanks to its tax efficiency.

The total allowable amount contributed to a Roth is $6,000 for 2021 ($7,000 if you’re age 50 or older). The IRS does have income limitations for who is eligible for a Roth IRA. Check if you qualify for a Roth here.

Best for: Young professionals who expect their incomes to rise as their careers advance, or their tax bracket to stay the same in retirement as it is now. Parents saving for their children’s education.

Health savings account (HSA)

Experts say an HSA is one of the most tax-favored, yet underused, investment vehicles.

People with a high-deductible health plan (HDHP) are eligible for a tax-advantaged Health Savings Account. Pros highly recommend that those who have an HSA use it not just as a medical fund for unexpected emergencies, but also as a long-term retirement savings account.

HSA has a triple-tax benefit: The money you put into an HSA is tax-deductible; the balance grows tax-free and rolls over each year; and withdrawals from your HSA for qualified medical expenses are not taxed. There are a variety of HSA investment options, from regular savings accounts to mutual funds.

The annual maximum HSA contribution in 2021 is $3,600 for an individual and $7,200 for a family. If you are at least 55 years old, you can contribute an additional $1,000 annually. Experts suggest you max it out if you can, given its triple-tax benefits. While you must have a high-deductible health plan to contribute to an HSA, you get to keep and use the funds even after you’ve changed insurance coverage.

You can search for HSAs on DepositAccounts.com, which, like MagnifyMoney, is a subsidiary of LendingTree. This may help you navigate the hundreds of plan providers out there.

Best for: People who have a high-deductible health plan.

529 plans

A 529 savings plan is a tax-advantaged savings account designed to encourage saving for qualified future education costs, such as tuition, fees, and room and board. Much like a 401(k) or IRA, a 529 savings plan allows you to invest in mutual funds or similar investments.

You can use 529 savings for private K-12 schooling. Tax benefits are extended to eligible education expenses for an elementary or secondary public, private, or religious school. You are allowed to withdraw up to $10,000 a year per student (child) for education costs.

Edward Vargo, an Ohio-based financial planner, told MagnifyMoney that 529 plans are “excellent legacy planning tools” for one’s grandchildren or great-grandchildren.

One drawback of a 529 plan is that earnings withdrawn not used for qualified education expenses will be taxed, and an additional 10-percent penalty is applied. So parents should thoroughly evaluate the expenses that might be needed to fund education down the road.

Best for: Parents, grandparents, or couples planning on having children.

Education

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If you want to advance your career, move up the ladder, or increase your earning potential, consider furthering your education.

To be sure, going back to school is a big time and financial commitment. Be prepared for a time period of uncertainty and income drop if you quit a full-time job to pursue a degree, which may require a lifestyle adjustment. But knowledge is invaluable, and there’s potential for an economic return, as well. A 2014 Georgetown University economic analysis of college majors found that obtaining a graduate degree leads to a wage bump.

Biology and life science graduate degree holders make a median of $35,000 more with a graduate degree, for instance. The median salary of those with an advanced degree in humanities and arts is $18,000 higher than their counterparts with a bachelor’s degree.

Investing in your education doesn’t necessarily require dropping everything to go back to school, either. Pursuing an unfinished degree on a part-time basis, attending professional workshops, taking ongoing education courses, or learning a new language could also be worth your time and money, depending on your career.

Best for: Professionals in fields where an advanced degree is highly preferred or those looking to advance their career or switch careers.

Open a brokerage account

If you’ve paid off your credit card debt, established an emergency fund, and exhausted all your tax-advantaged accounts, you can open a regular old brokerage account to squirrel away some more money.

A brokerage account is much like an IRA. It’s more flexible in terms of investment choices and money withdrawal than 401(k)s, but you don’t get any tax breaks. It allows you to buy and sell a wide variety of securities, from stocks and bonds to mutual funds, currency, and futures and options contracts, through a brokerage firm.

You can open a brokerage account with any of the major investment firms like Vanguard,Charles Schwab, or Fidelity. Just like with other financial accounts, you deposit money and work with a broker to buy or sell securities. The broker will recommend investments depending on your personal financial situation and goals. But you have the final say on investment decisions. The brokerage firm takes a commission for executing your trades, and there are fees linked to the transactions, ranging from account maintenance fees and markups/markdowns to wire fees and account closing fees.

Be prepared for a steep learning curve as a market newbie. You will have to study how each financial instrument works and the companies you invest in, such as learning to read their quarterly financial reports. Holding a brokerage account is also a big-time commitment. Although a broker will help you make investment decisions, you will have to stay on top of the daily market movements and news that may impact the market to make sure you are making a profit.

Best for: Aggressive investors with high-risk tolerance and extra savings.

Invest in real estate

Real estate could be a good place to tap into if you are looking to diversify your portfolio. There are a couple options. If you want to get hands-on, you can buy a home and rent it out, flip houses, or rent out your existing home. Or if you don’t want to be quite so involved, investing in Real Estate Investment Trusts (REITs) is another option.

If you are buying a property, experts advise you put the down payment funds in a fairly liquid account, so that it’s immediately available when you need to make a purchase.

Whichever way you choose to invest in real estate, you want to keep up with the latest economic trends, especially the real estate market.

Unlike many other highly liquid investments, properties cannot be bought and sold for profit in a heartbeat. You want to set aside cash for other life expenses before jumping into real estate, because you are likely to hold the property for a long time.

Best for: Investors with a large sum of cash to cover a down payment and those who understand the real estate market.

Invest in a business

You may think it’s a type of venture only the super rich or a venture capitalists can do. Well, not necessarily.

The Securities and Exchange Commission in 2015 approved crowdfunding rules that allow startups or small businesses to seek investors through brokers or online crowdfunding platforms. This basically means, ordinary Joes can now buy into startups now.

A parade of online equity crowdfunding platforms allow non-accredited investors to put money in small businesses and startups. MicroVentures, DreamFunded, SeedInvest, StartEngine, and Wefunder are among those.

But tread carefully. Entrepreneurship gives hope and excitement, but investing in small businesses and startups is risky.

Make sure you do homework before starting a venture. Familiarize yourself with the process and understand the risks. You also want to research the company thoroughly, and understand its management structure and the product or service it offers. Basically, read up on anything you can to find about the company you buy into.

Because of the risks involved, the SEC put a cap on how much you can invest in those businesses through crowdfunding depending on your net worth and annual income. Check the limitations here.

Best for: Adventurous investors who are comfortable with the potential risks, passionate about entrepreneurship, and willing to spend time studying the businesses they invest in.

Wait, but what about Bitcoin?

Investing in the extremely volatile Bitcoin is so risky that it has the chairman of the U.S. Securities and Exchange Commission on guard.

Bitcoin has had a wild ride. Its value skyrocketed from $1,000 to $19,000 in 2017, often moving thousands of dollars a day. And it’s been in the news constantly. But, as with any high-risk financial move, you shouldn’t invest unless you are willing to lose it all. There are no consumer protections on Bitcoin. If Bitcoins are lost or stolen, they are gone forever.

That being said, if you are curious about it and want to learn how it works, you can throw in $20 or $100 to buy through a digital currency exchange or broker. You can read more about the cryptocurrency craze in our ultimate Bitcoin guide.

Best for: Curious investors willing to experiment — and potentially lose.

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Understanding the Different Types of IRAs

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It may not have not been reviewed, commissioned or otherwise endorsed by any of our network partners or the Investment company.

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Saving for retirement can be daunting enough — before you even get to choosing the kind of account that will house those savings. Individual retirement accounts (IRAs) alone have several iterations, each with its own specifications for different circumstances. Below, we cover the types of IRAs, their features and their limitations so you can make an informed decision about which IRA is right for you and your retirement.

What is an IRA?

The IRA was created by the Internal Revenue Service (IRS) to give individual investors another way to save for retirement. Rather than socking away your money in a savings account, you can contribute to an IRA, which allows you to take advantage of market gains, helping your money grow faster. There may even be some tax benefits to using an IRA.

There are several types of IRAs available:

  1. Traditional IRA
  2. Roth IRA
  3. SEP IRA
  4. SIMPLE IRA
  5. Rollover IRA
  6. Spousal IRA
  7. Nondeductible IRA
  8. Inherited IRA
  9. Education IRA

6 popular IRA types

While there are many different types of IRAs, you probably won’t use all of them. In fact, you’ll most likely use just one or two of the most common types in your lifetime. Below are six of the most popular IRA types available.

1. Traditional IRA

  • Who it’s best for: Ideal for workers who don’t have access to an employer-sponsored retirement plan.
  • Contribution limits: In 2020 and 2021, you can contribute up to $6,000 per year (or $7,000 if you’re 50 or older). Limits apply to all your traditional IRAs and Roth IRAs.
  • Tax treatment: If you aren’t covered by a retirement plan at work, you can deduct the full amount of your contribution on your tax return.

A traditional IRA is one of the most common forms of IRAs. You can open and contribute to a traditional IRA until you reach the age of 70 and a half. You can open one as your sole retirement vehicle — as some self-employed people do — or as a supplement to a 401(k) plan. There’s no income limit, so you can contribute to a traditional IRA regardless of how much money you make.

According to Paul T. Joseph, an attorney and certified public accountant, a traditional IRA offers substantial benefits.

“The traditional IRA allows you to invest money into a tax-deferred account, which you can invest and allow to grow tax-sheltered until you withdraw the money or are compelled to withdraw the money at age 70 and a half,” said Joseph. “You receive a tax benefit upon the deposit into the account, and the account grows tax deferred until withdrawal.”

2. Roth IRA

  • Who it’s best for: Ideal for low- and middle-income workers.
  • Contribution limits: In 2020 and 2021, you can contribute up to $6,000 per year (or $7,000 if you’re 50 or older). Limits apply to all your traditional IRAs and Roth IRAs.
  • Tax treatment: Funds are contributed post-tax, which means the withdrawals are not taxed in retirement.

Roth IRAs can be powerful savings tools, but they differ from traditional IRAs. When you open a Roth IRA, contributions are made after you pay taxes on the money. While you don’t get the upfront tax benefit, Roth IRAs offer a unique perk once you retire.

“When you decide you want to withdraw money from the Roth IRA account, any earnings made in the account are tax-free,” said Joseph. “The investment must stay in the account for at least five years to qualify. With a Roth IRA, you are not compelled to begin withdrawals at age 70 and a half.”

Not everyone can contribute to a Roth IRA, however. The IRS implements income thresholds where if you make more than a certain amount, you can contribute either a reduced amount or nothing at all to a Roth IRA. These amounts typically change each year.

3. SEP IRA

  • Who it’s best for: Business owners who want to offer their employees a retirement plan, as well as freelancers.
  • Contribution limits: In 2020, employers can contribute up to 25% of compensation or $57,000, whichever is less. Self-employed individuals can contribute up to 25% of their net earnings from self-employment (not including contributions for themselves), as much as $57,000. That limit jumps to $58,000 for 2021.
  • Tax treatment: Contributions are tax-deductible.

A simplified employee pension (SEP) IRA is a tax-deferred retirement plan for small-business owners, self-employed individuals and freelancers. Generally, SEP IRAs are good accounts for business owners who want to contribute to their employees’ retirements. With these accounts, the employer contributes on the employee’s behalf.

4. SIMPLE IRA

  • Who it’s best for: Small-business owners who want to make tax-deferred contributions to an employee’s plan.
  • Contribution limits: In 2020 and 2021, employers can contribute up to 3% of the employee’s compensation as an employer match, or 2% of the employee’s compensation if the employee doesn’t contribute. The employee contribution limit for 2020 and 2021 is $13,500.
  • Tax treatment: Contributions are tax-deductible and required every year.

A savings incentive match plan for employees (SIMPLE) IRA is for small-business owners — businesses with 100 employees or fewer — who want to offer a tax-deferred retirement plan. A SIMPLE IRA requires contributions from the employer, which can be made on their own or to match an employee’s contributions.

Employees are eligible if they received at least $5,000 in compensation from the employer in any two preceding years and are expected to earn at least $5,000 in the current year.

5. Rollover IRA

  • Who it’s best for: Employees with 401(k) accounts from past employers.
  • Contribution limits: The same as the contribution limits for traditional IRAs: up to $6,000 per year in 2020 and 2021 (or $7,000 if you’re 50 or older). You can roll over the full amount of your 401(k).
  • Tax treatment: Roll over your account balance, and all future contributions are tax-deferred.

Deciding exactly what you should do with a 401(k) when you leave a job can be tricky. Cashing it out causes you to lose money, so a better idea is to roll it over into an IRA. With this approach, you transfer the 401(k) funds into an IRA. The new rollover IRA allows you to keep the full balance and continue to contribute to your account. You can complete a rollover online within minutes through online investment companies.

6. Spousal IRA

  • Who it’s best for: Nonworking spouses.
  • Contribution limits: You can contribute up to $6,000 per year in 2020 and 2021 (or $7,000 if you’re 50 or older).
  • Tax treatment: Contributions are tax-deductible.

It can feel like your retirement options are limited if you aren’t working. The IRS allows nonworking or low-income spouses to contribute household income into an IRA to save for the future.

“In some situations where a married couple only has one party earning income, they are still able to create a spousal IRA and place money into the IRA for the benefit of the nonworking spouse,” said Joseph. “Provided you don’t exceed your earned income, you can essentially double your contributions into an IRA through the use of a spousal IRA.”

A spousal IRA can be either a traditional IRA or Roth IRA, depending on your preference and income. Depending on the account you choose, you can deduct the amount you contribute and watch the money grow tax-deferred over time. It’s a powerful option that can help your retirement nest egg grow as a couple.

How to open an IRA

Opening an IRA is a relatively easy process. To get started, identify which type of IRA is best for you. Then choose a bank or financial institution to hold your investments. Companies like Vanguard, Fidelity, TD Ameritrade and Betterment all offer IRAs.

Depending on the company you choose, you may need anywhere from $500 to $1,000 to open an account. Once you open the account — which takes just a few minutes online — you can choose your mix of investments to design your portfolio.

Not sure which investments to choose? Learn about mutual funds and ETFs and which is best for you.

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