Top 10 Reasons to Contribute to an IRA (Traditional & Roth) in 2025
Want to invest for retirement but not sure where to begin? Even with zero investing experience, Individual Retirement Accounts (IRAs) are a fantastic place to start.
In this post, we break down the top 10 reasons you should contribute to a Traditional or Roth IRA.
1. Tax Break with a Traditional IRA
A Traditional IRA can lower your taxes today. If you qualify, you can deduct your IRA contribution from your taxable income, which could mean a smaller tax bill or a bigger refund. In plain terms, contributing to a Traditional IRA could save you money on this year’s taxes. Learn more about IRAs, contribution limits and deduction limits here. The bottom line: a Traditional IRA lets you invest for the future and you might pay less in taxes now.
2. Tax-Free Withdrawals in Retirement (Roth IRA)
On the flip side, a Roth IRA could offer tax-free money later. You contribute to a Roth IRA with after-tax dollars (no upfront deduction), but the benefit is that qualifying withdrawals in retirement – including all the earnings – can be tax-free. Imagine reaching age 59½ and accessing your invested money without owing taxes on it. For younger investors likely to be in a higher tax bracket down the road, a Roth IRA can be great way to invest. You pay taxes now while you’re in a lower bracket, then enjoy tax-free income when you retire.
3. Tax-Advantaged Compounding Growth (Your Money Could Grow Faster Over Time)
Both Traditional and Roth IRAs give your money tax-advantaged growth. This means your investments can grow without being taxed each year. In a regular savings or brokerage account, you might owe taxes annually on interest, dividends, or capital gains. In an IRA, those earnings usually stay in the IRA account and compound year after year tax-deferred (or tax-free in a Roth IRA). Your investment balance can snowball bigger and faster over time.
4. Contribution Limits – Up to $7,000 (or $8,000 if 50+)
The IRS lets you contribute to your IRA each year. You can invest up to $7,000 ($8,000 if you’re 50 or above). Maximizing this contribution every year can have a big positive impact – the more you put in (within the limit), the more your money works for you. You can just focus on contributing what you can, but the more you contribute, the more your nest egg can grow over time.
5. The Power of Compound Returns Over Time
Compound returns are your best friend when investing for retirement. It’s the concept of earning returns on both the growth of your original and additional investments as well as income generated by those investments. Over time, this can lead to big returns. Starting an IRA early means even small contributions can grow into a surprisingly large sum thanks to compounding. For example, consistently investing even a modest amount in your 20s can beat investing larger amounts in your 40s – simply because your money had more time to grow. The key takeaway: the sooner and more consistently you contribute, the more time your money has to compound.
6. Wide Range of Investment Options
IRAs offer flexibility in how you invest your money. Unlike some 401(k) plans that might have a limited menu of investment options, with an IRA you can choose from a broad range of investments – stocks, bonds, index funds, mutual funds, ETFs, and more. Beanstox offers expert-built ETF portfolios, so you don’t have to worry about picking stocks and bonds. With Beanstox, you can also set up automated investing so you can invest automatically over time, a great feature.
7. You’re in Control
One great reason to contribute to an IRA: you’re fully in control of the account. It’s not tied to any employer. You also have flexibility in how and when you contribute – make deposits on your schedule (all at once or bit by bit) as long as you stay within the annual limit. IRAs offer some flexibility for life’s curveballs. In a Roth IRA, for instance, you can generally withdraw your contributions at any time without taxes or penalties (since you already paid tax on them). And for both Traditional and Roth, there are certain cases like a first-time home purchase or birth of a child where you can withdraw money early without penalty. You can learn more about distribution rules here.
8. Easy to Start
Starting an IRA is simple and beginner-friendly. You don’t need a lot of money to begin. You can open an IRA account with Beanstox in minutes and start with as little as $100. Without any experience, you can easily invest and set up automatic investments to get going. Think of an IRA as the “entry-level” way to invest for your future – it’s designed for ordinary people, not Wall Street experts. Every journey starts with a first step, and opening an IRA is a small step today that could lead to big returns in the future.
9. Future Financial Security and Peace of Mind
Contributing to an IRA is an investment in your future financial security. Social Security alone might not guarantee the comfortable retirement you dream of. Knowing you have investments growing over the long term can bring peace of mind. By regularly funding your IRA, you’re essentially taking care of your future self – improving the chances you can maintain your lifestyle, cover medical costs, travel, or simply stress less about money when you’re older. In short, an IRA contribution today is a gift to the “future you”.
10. Boost Your Overall Retirement Investments (Beyond Your 401(k))
Finally, IRAs are a perfect way to supplement other retirement investments. If you have a 401(k) or similar plan at work, contributing to an IRA lets you set aside even more money for retirement on top of your employer plan. The IRA limit is separate from your 401(k) limit, so it’s a chance to save extra. If you don’t have a 401(k) available, an IRA is very useful. It gives you a tax-advantaged way to invest for the future on your own. Either way, an IRA can help you diversify your retirement investments. You could use a Traditional IRA to get a tax break now and a Roth 401(k) at work for tax-free withdrawals later[LP1] . By taking advantage of both work plans and IRAs, you can accelerate your investments and build a bigger retirement fund. Learn about 401(k) plans here.
Take Charge of Your Future Today
An IRA, whether Roth or Traditional, is one of the most powerful tools for young and middle-income earners to build wealth for the future. It offers tax advantages, the power of compound returns, flexibility, and a sense of control over your retirement future. You can contribute up to $7,000 (or $8,000 if you’re 50+) to this purpose each year, so why not take advantage?
Ready to get started? The sooner you begin, the more time your money has to grow. For more details, check out the official IRS resources on IRA rules and contribution limits. Consider opening your Beanstox IRA today, your future self will thank you!
Get Started With Beanstox
Set yourself up for a better future, with the freedom and security that come from having a growing portfolio. Download Beanstox and set up your automated recurring deposits today!
