What a Purple retirement account is

A Purple retirement account is a direct-to-consumer (DTC) retirement savings product offered by Purple, a financial services company. It functions as a self-directed brokerage account designed for retirement savings, meaning you control which investments go into it rather than choosing from a preset menu. Purple handles the account administration and custodial services while you make the investment decisions.

Purple accounts are not employer-sponsored plans. They operate as individual retirement accounts (IRAs) or taxable brokerage accounts, depending on which product you open. The company markets these accounts directly to consumers online, which is why they fall under the DTC category — there is no employer middleman and no financial advisor required to set one up.

The account structure and tax treatment depend on which specific product you choose. Purple offers both traditional and Roth IRA options, as well as taxable investment accounts. Each has different contribution limits, tax rules, and withdrawal restrictions.

Key Takeaways

  • Purple accounts are self-directed retirement savings products you open directly with the company, not through an employer or advisor.
  • You can choose between a traditional IRA, Roth IRA, or taxable brokerage account, each with different tax treatment and contribution rules.
  • Purple handles custodial services and account administration while you decide which investments to hold in the account.
  • Contribution limits for IRAs are set by the IRS and are the same across all providers, but Purple's fees and investment options may differ from other platforms.
  • Withdrawals from traditional IRAs are taxed as income, while Roth IRA withdrawals of contributions are tax-free, and taxable accounts have capital gains tax rules.

Purple IRA options and contribution limits

Purple offers both traditional IRA and Roth IRA accounts. A traditional IRA may allow you to deduct contributions from your taxable income in the year you make them, though deductibility phases out if you or your spouse have access to an employer retirement plan and earn above a certain income level. A Roth IRA has no income deduction, but may have access to withdrawals in retirement are tax-free.

The annual contribution limit for both traditional and Roth IRAs is set by the IRS and applies across all providers — it is not specific to Purple. For 2024, the limit is $7,000 per year for people under age 50, and $8,000 for people age 50 and older (the extra $1,000 is called a catch-up contribution). These limits change periodically, and Purple's website should reflect the current year's limit.

You can contribute to a Purple IRA only if you have earned income in that tax year. Earned income means wages, self-employment income, or other compensation reported to the IRS — it does not include investment returns, pensions, or Social Security. If you are married and one spouse has no earned income, you may be able to contribute to a spousal IRA on their behalf, subject to the same annual limits.

Purple also offers taxable brokerage accounts with no contribution limits. You can deposit as much as you want into a taxable account, but you will owe capital gains tax on investment profits when you sell, and dividend tax on distributions each year.

How Purple's self-directed investment model works

Unlike many retirement account providers that offer a curated list of mutual funds or target-date portfolios, Purple gives you access to a broader range of investments. You can typically hold individual stocks, ETFs, bonds, and other securities within your Purple account. This is what "self-directed" means — you research and choose the specific investments rather than selecting from a limited menu.

Self-directed accounts require more knowledge and active decision-making on your part. You are responsible for researching investments, deciding how much to allocate to each one, and rebalancing your portfolio over time. Purple provides the platform and custodial infrastructure, but not investment information or recommendations.

Purple charges fees for account maintenance and trading. The specific fee structure — whether there are monthly account fees, per-trade commissions, or other charges — varies by account type and should be reviewed on Purple's website or in their fee schedule before you open an account. These fees reduce your net returns, so comparing them to other DTC providers is part of deciding whether Purple fits your situation.

Tax treatment of Purple traditional and Roth accounts

A traditional IRA through Purple offers a potential tax deduction in the year you contribute, but you pay income tax on withdrawals in retirement. The money grows tax-deferred, meaning you do not owe tax on investment gains each year — only when you withdraw. At age 73, you must begin taking required minimum distributions (RMDs), which are calculated based on your age and account balance. RMDs are taxed as ordinary income.

A Roth IRA through Purple offers no tax deduction when you contribute, but may have access to withdrawals are entirely tax-free. To may have access to for tax-free withdrawals, you must be age 59½ and have held the account for at least five tax years. You can withdraw your contributions (not earnings) at any time without tax or penalty. Roth accounts have no required minimum distributions during your lifetime, which can be useful for estate planning. However, Roth contributions are subject to income limits — if you earn above a certain threshold, you cannot contribute directly to a Roth IRA.

A taxable brokerage account through Purple has no contribution limits and no withdrawal restrictions, but you owe tax on capital gains when you sell investments and on dividends or interest each year. Long-term capital gains (on investments held over one year) are taxed at preferential rates, while short-term gains are taxed as ordinary income.

Withdrawal rules and early withdrawal penalties

Traditional IRA withdrawals before age 59½ are generally subject to a 10% early withdrawal penalty plus income tax on the amount withdrawn. Some exceptions exist — for example, you can withdraw up to $10,000 lifetime for a first home purchase, or withdraw for certain medical expenses or education costs — but these exceptions are narrow and have specific requirements. Purple's website or customer service can explain which exceptions may explore to your situation.

Roth IRA withdrawals of your contributions can happen at any time without penalty or tax. Withdrawals of earnings before age 59½ are subject to the 10% penalty and income tax, unless an exception applies. Because Roth contributions are made with after-tax dollars, the IRS allows you to separate contributions from earnings, so you can access your contributions penalty-free while leaving earnings in the account to grow.

Taxable brokerage accounts have no withdrawal restrictions or penalties — you can withdraw money whenever you want. You will owe capital gains tax on profits when you sell, but there is no age requirement or penalty structure.

How Purple accounts compare to employer plans and other DTC options

Purple accounts are individual accounts, not employer-sponsored plans. If your employer offers a 401(k), 403(b), or other workplace retirement plan, that plan may have higher contribution limits (up to $69,000 in 2024, depending on the plan type) and may offer employer matching contributions. Employer matching is information programs and is usually worth prioritizing before opening a Purple account.

Other DTC retirement account providers include Fidelity, Schwab, Vanguard, and E*TRADE. These companies also offer self-directed IRAs and taxable accounts with similar structures to Purple. The differences lie in fee schedules, investment selection, user interface, and customer service. Comparing Purple's fees and available investments to competitors can help you decide which platform fits your needs and preferences.

If you are self-employed or own a small business, you may have access to a SEP IRA or Solo 401(k), which allow much higher contributions than a standard IRA. These are not DTC products in the same way — they typically require a business tax return and more complex setup — but they may offer better savings potential if you may have access to.

Frequently Asked Questions

Can I move money from another IRA into a Purple account?

Yes, through a process called a rollover or transfer. A direct transfer moves funds from your old IRA custodian to Purple without you touching the money. A rollover means the old custodian sends you a check, and you deposit it into Purple within 60 days. Direct transfers are simpler and avoid the 60-day important date risk. Contact Purple's customer service for their specific rollover procedures and required forms.

What happens to my Purple account if I change jobs?

Purple IRAs are not tied to your employer, so changing jobs does not affect them. If you have a 401(k) at your old job, you can roll it into your Purple IRA (if Purple accepts rollovers from your plan type), but your Purple account itself continues unchanged. Taxable brokerage accounts through Purple are also unaffected by employment changes.

Do I have to pay taxes on my Purple account every year?

Traditional and Roth IRAs do not generate annual tax bills — you only pay tax when you withdraw. Taxable brokerage accounts do generate annual tax liability on dividends, interest, and capital gains, even if you do not withdraw anything. You will receive a 1099 form from Purple reporting these amounts for your tax return.

Can I use a Purple account if I am self-employed?

Yes, you can open a traditional or Roth IRA through Purple if you have self-employment income. However, self-employed people may benefit more from a SEP IRA or Solo 401(k), which allow much higher annual contributions. Purple may not offer these business retirement plans, so check their product list or speak with a tax professional about which account type maximizes your savings potential.

What if I exceed the annual contribution limit?

Excess contributions to an IRA are subject to a 6% excise tax each year they remain in the account. If you over-contribute, contact Purple when ready to request a return of the excess amount plus any earnings on it. The IRS has specific rules about correcting excess contributions, and Purple can guide you through the process, but acting quickly is important to minimize penalties.