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IRAs

An Individual Retirement Arrangement/Account (IRA) allows for you to save for your retirement while making the most of tax advantages the government offers to encourage this type of activity. To open an IRA, you must have taxable income during the year.

Types of IRAs

You may choose from either a Traditional or Roth IRA depending on your individual situation. Consult your tax advisor for the option that is best for you.

The Traditional versus Roth Comparison table below outlines common questions and significant differences between the two accounts.

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Contribution Limits

Tax benefits for each individual vary, and it is recommended that you consult with an investment and/or tax advisor to determine the best investment plan for you.

IRA Contribution Limits: IRS Website

Withdrawals

Background

You may withdraw or use your traditional IRA assets at any time. However, a 10% additional tax generally applies if you withdraw or use IRA assets before you are age 59½.

You generally may make a tax-free withdrawal of contributions if you do it before the due date for filing your tax return for the year in which you made them. This means that, even if you are under age 59½, the 10% additional tax may not apply.

Required Minimum Distributions — Traditional IRAs

You cannot keep funds in a Traditional IRA indefinitely. Eventually they must be distributed. If there are no distributions, or if the distributions are not large enough, you may have to pay a 50% excise tax on the amount not distributed as required.

If you are the owner of a traditional IRA, you must generally start receiving distributions from your IRA by April 1, of the year following the year in which you reach age 70½. April 1 of the year following the year in which you reach age 70½ is referred to as the required beginning date.

You must receive at least a minimum amount for each year starting with the year you reach age 70½ (your 70½ year). If you do not (or did not) receive that minimum amount in your 70½ year, then you must receive distributions for your 70½ year by April 1 of the next year.

Roth IRA Withdrawals

You are not required to take distributions from your Roth IRA at any age. The minimum distribution rules that apply to traditional IRAs do not apply to Roth IRAs while the owner is alive. However, after the death of a Roth IRA owner, certain of the minimum distribution rules that apply to traditional IRAs also apply to Roth IRAs. Please consult your tax advisor.

You may not use your Roth IRA to satisfy minimum distribution requirements for your traditional IRA. Nor can you use distributions from traditional IRAs for required distributions from Roth IRAs.

More Information

The IRS provides great resources for assessing your financial needs and getting started with IRAs in addition to extensive information for beneficiaries of IRAs. You may find more information here.

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