What We Offer
Payroll deduction IRAs
Payroll deduction IRAs can be a low-cost, simple way workers can save for retirement.
Employees set up a traditional or Roth IRA on their own, and then let the employer know how much they’d like to contribute from each paycheck.
Any employer or sole proprietor can set up a payroll deduction IRA program. Here are the basics:
Eligibility
Employers who set up payroll deduction IRAs must allow all employees to participate. There are no service-length requirements. Employees are responsible for setting up a traditional or Roth IRA and must meet IRA eligibility requirements.
Contributions
Employees determine how much of their paychecks they want to contribute to their IRAs. The 2025 contribution limit for IRAs is $7,000, or $8,000 for investors age 50 or older. Employer contributions are not allowed.
Taxes
Employees who set up a payroll deduction IRA benefit from all of the tax advantages offered by IRAs.
Traditional IRA contributions are made before taxes are deducted, which means that income taxes are not paid at the time of investment. Instead, taxes are paid when the money is withdrawn, including on any earnings. This deferred tax leaves more money in an employee’s pocket — money to invest, save or spend.
Roth IRA contributions are made with money that has been taxed. Money that’s been taxed won’t be taxed when employees withdraw it. Additionally, any earnings are tax- and penalty-free for qualified distributions.*
* Withdrawals from Roth accounts are tax- and penalty-free if the account was established at least five years before, and if the owner is at least 59½ years old, disabled or deceased. For nonqualified distributions, earnings are taxable and may be subject to a 10% early withdrawal penalty.
Distributions
Payroll deduction IRA distributions follow traditional and Roth IRA distribution rules.
Traditional IRA — Distributions are taxable, but can be taken without penalty after age 59½. Distributions before age 59½ are subject to a 10% early withdrawal penalty, although exceptions may apply, such as for periodic payments, withdrawals for disability, medical bills or a first-home purchase.
Roth IRA — Distributions up to the amount contributed can be made at any time without taxes or penalties. Distributions from earnings are tax- and penalty-free if the first Roth contribution was made at least 5 years before and the investor is at least 59½, is purchasing a first home, or is disabled or deceased. Otherwise, taxes and penalties may apply.
Easy administration
Contributions are automatically deducted from employee paychecks.
- There are no IRS forms to complete.
- The program can be discontinued at any time without penalty.
- Employers have no fiduciary liability because the retirement plan is not employer-sponsored.
Setting up an account
Employers can start a plan with American Funds by contacting their financial professional. Don't have a financial professional?
Other resources
Investment options
Employees can establish an IRA with American Funds or another financial institution, and choose any of the investments offered.
American Funds Target Date Retirement Series®
Convenience
Select a target date fund that is based on your nearest anticipated retirement date. A single investment provides a fund-of-funds portfolio of actively managed American Funds aligned with an investor’s time horizon.
American Funds Portfolio SeriesSM
Objective-focused
With objectives like growth, income and preservation, these funds of funds offer diversification and control in a single investment.
Individual mutual funds
Customized
Investors can build an investment portfolio of American Funds to meet their specific preferences and needs.
Allocations may not achieve investment objectives. The portfolios' risks are directly related to the risks of the underlying funds.