Traditional IRA
Traditional IRA
What is an IRA?
An individual retirement arrangement (IRA) is a personal savings plan that offers specific tax benefits while helping you achieve your retirement goals. IRAs are one of the most powerful retirement savings tools available to you. Even if you're contributing to a 401(k) or other plan at work, you should also consider investing in an IRA.
What is a Traditional IRA?
You should understand the differences between a Traditional IRA and a Roth IRA before choosing the type of IRA that's best for you. Traditional IRA contributions can be deductible or nondeductible. Once you turn age 72, you are required to take a minimum distribution each year.
Benefits
- Contributions can be tax-deductible or non-tax-deductible. (Consult with your tax advisor.)
- Earnings grow tax-deferred until withdrawn after age 59½, at which time they are taxed at your current rate.
- A wide range of investment options is available.
Considerations
- Minimum annual withdrawals are required when you reach age 72 (known as required minimum distributions).
- Your ability to make deductible contributions may be reduced or eliminated if you are covered by an employer-sponsored retirement plan and varies based on your income.
- Prior to January 1, 2020, you were unable to contribute if you were age 70½ or older.
- Beneficiaries pay income tax on proceeds after your death.
- Most may convert a Traditional IRA to a Roth IRA.
Details
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Eligibility
• Anyone who has taxable compensation equal to or greater than their IRA contribution amount.o If you contribute to an employer-sponsored plan such as a 401(k) you may still be eligible to contribute to a Traditional IRA.o If you have no taxable compensation, but your spouse earns enough income to cover your contribution as well as his or her own, you can contribute to a Traditional IRA. -
Income Limits
No limits for nondeductible contributions
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Annual Contribution Limits1
• $6,000 under age 501• $1,000 additional catch-up contribution if age 50 and over• You may contribute simultaneously to a Traditional IRA and a Roth IRA (subject to eligibility) as long as the total contributed to all (Traditional and Roth IRAs) does not exceed described limits. -
Tax Considerations*
o Your deduction is allowed in full if you (and your spouse, if you are married) are not covered by a retirement plan at work.o Your deduction may be limited if you (or your spouse, if you are married) are covered by a retirement plan at work and your income exceeds certain levels. -
Types of Investments
Stocks, bonds, mutual funds, exchange-traded funds (ETFs), U.S. Treasuries, Brokered CDs, unit investment trusts (UITs), and annuities
Disclosures:
- Effective Jan 1, 2019 individual annual contribution limit is raised from $5,500 to $6,000.
*Consult your tax or legal advisor for tax planning relating to your current situation.
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The information provided on this website is not meant as a recommendation or endorsement of any specific security or strategy. An individual’s situation can vary; therefore the information provided above should be relied upon only when coordinated with individual professional advice.
Mutual funds, annuities, and other investment products:
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May lose value |
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