What's an IRA?
An IRA is a personal, tax-deferred account the IRS created to give investors an easy way to save for retirement. Because this account is tax-deferred, any earnings you make grow tax-free. Roth, traditional, and spousal are 3 common types of IRAs, which you can read more about below.
Types of IRAs we offer
Roth IRA
- You won't be able to deduct your Roth IRA contribution.
- You won't pay taxes on withdrawals of your earnings as long as you take them after you've reached age 59½ and you've met the 5-year-holding-period requirement.
- Income limitations apply.
- If your spouse is earning low or no annual wages, they may be able to open a spousal IRA to save tax-efficiently for retirement.
Traditional IRA
- You may be able to deduct some or all of your traditional IRA contributions.
- You'll pay ordinary income tax on withdrawals of earnings and on any contributions you originally deducted on your taxes.
- No income limitations.
- If your spouse is earning low or no annual wages, they may be able to open a spousal IRA to save tax-efficiently for retirement.
Compounding
The snowball effect that happens when your earnings generate even more earnings, not only on your original investments, but also on any interest, dividends, and capital gains that accumulate. That means that your "money makes money" and can grow faster over time.
Tax-deferral
Delaying the payment of income taxes on earnings generated in an investment account. For example, if you have a traditional IRA, you don't pay income taxes on the interest, dividends, or capital gains accumulating in the account until you begin making withdrawals.
How your savings can add up
- Grow your wealth
- Low costs
- Catch-up contribution
Note that the hypothetical examples don't represent the returns on any particular investments and the rates of return aren't guaranteed.
While the annual IRA contribution limit of $6,500 may not seem like much, you can stack up significant savings.
Pay less and keep more. The average Vanguard mutual fund expense ratio is 83% lower than the industry average.†
At age 50, you qualify for a $1,000 IRA catch-up contribution—jumping your annual limit to $7,500—potentially increasing the power of compounding, which could mean greater savings for you over time.
While the annual IRA contribution limit of $6,500 may not seem like much, you can stack up significant savings.
Pay less and keep more. The average Vanguard mutual fund expense ratio is 83% lower than the industry average.†
At age 50, you qualify for a $1,000 IRA catch-up contribution—jumping your annual limit to $7,500—potentially increasing the power of compounding, which could mean greater savings for you over time.
- Grow your wealth
- Low costs
- Catch-up contribution
Note that the hypothetical examples don't represent the returns on any particular investments and the rates of return aren't guaranteed.
The hypothetical bar chart shows that if you contribute $6,500 yearly with a 6% average annual return, you could have $259,953 in your retirement account at the end of 20 years.
The hypothetical example shows $259,953 on the higher end of a seesaw after you invest $6,500 yearly on a 6% average annual return over 20 years. The lower end of the seesaw shows $299,945 after you invest $7,500 yearly starting at age 50 with a 6% average annual return over 20 years.
Helpful resources
Investing on your own?
Check out key information you can use as you begin your successful DIY investing journey.
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Have a nonretirement savings goal?
We have a variety of accounts to select from. See which best fits your savings needs.
Frequently asked questions
There's no charge to open a Vanguard IRA. The fund or product you choose may have a minimum investment amount.
Minimum investments for Vanguard mutual funds can range from $3,000 to $50,000. Non-Vanguard fund minimums are subject to the respective fund companies' rules.
Vanguard ETFs® can be purchased for as little as $1. Non-Vanguard ETFs and products—like stocks, bonds, etc.—must be purchased at market price.
Traditional IRA contributions could help reduce your taxable income. Your deduction amount can vary depending on your modified adjusted gross income and whether you're covered by a retirement plan at work.
An IRA itself isn't an investment. It's a basket that holds your selected products—mutual funds, ETFs, stocks, bonds, etc. Your retirement portfolio's earnings depend on the investments you choose, how they perform in the market, and the interest they pay.
You can invest in mutual funds, ETFs, stocks, bonds, and more. You can even select mutual funds created specifically for retirement. Target Retirement Funds, for example, are broadly diversified mutual funds that come with a preset, professionally managed investment mix—so you can get a complete portfolio with just one fund.
Learn how to choose IRA investments
Explore Target Retirement Funds
If you have a retirement account, like a 401(k) or 403(b), with a former employer, consider rolling over that money into an employer-sponsored plan held at Vanguard or a Vanguard IRA. Keeping track of your portfolio can be easier when all your assets are consolidated in one place.
Yes. You can get the advice you need by using our robo-advisor or working with a financial advisor for ongoing portfolio guidance and access to exclusive tools.
*Withdrawals from a Roth IRA are tax-free if you're age 59½ or older and have held the account for at least 5 years; withdrawals taken prior to age 59½ or 5 years may be subject to ordinary income tax or a 10% federal penalty tax, or both. (A separate 5-year period applies for each conversion and begins on the first day of the year in which the conversion contribution is made.) The 5-year holding period for Roth IRAs starts on the earlier of: (1) the date you first contributed directly to the Roth IRA, (2) the date you rolled over a Roth 401(k) or Roth 403(b) to the Roth IRA, or (3) the date you converted a traditional IRA to the Roth IRA. If you're under age 59½ and you have one Roth IRA that holds proceeds from multiple conversions, you're required to keep track of the 5-year holding period for each conversion separately.
**Vanguard is owned by its funds, which are owned by Vanguard's fund shareholder clients.
†Vanguard average expense ratio: 0.08%. Industry average expense ratio: 0.47%. All averages are asset-weighted. Industry averages exclude Vanguard. Sources: Vanguard and Morningstar, Inc., as of December 31, 2022.
For more information about Vanguard mutual funds or Vanguard ETFs, obtain a mutual fund or an ETF prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.
Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
Investments in target-date funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in target date funds is not guaranteed at any time, including on or after the target date.
When taking withdrawals from an IRA before age 59½, you may have to pay ordinary income tax plus a 10% federal penalty tax.
All investing is subject to risk, including the possible loss of the money you invest. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. Diversification does not ensure a profit or protect against a loss.
Vanguard's advice services are provided by Vanguard Advisers, Inc. ("VAI"), a registered investment advisor, or by Vanguard National Trust Company ("VNTC"), a federally chartered, limited-purpose trust company.
The services provided to clients will vary based upon the service selected, including management, fees, eligibility, and access to an advisor. Find VAI's Form CRS and each program's advisory brochure here for an overview.
VAI and VNTC are subsidiaries of The Vanguard Group, Inc., and affiliates of Vanguard Marketing Corporation. Neither VAI, VNTC, nor its affiliates guarantee profits or protection from losses.