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.

Individual Retirement Accounts Rates
Raymond James Investment Services

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.

Question Traditional IRA? Roth IRA?
Is there an age limit on when I may set up and contribute? Yes. You must not have reached age 70½ by the end of the year. No. You may be any age.
May I deduct contributions? Yes. You may be able to deduct your contributions to a traditional IRA depending on your income, filing status, whether you are covered by a retirement plan at work, and whether you receive social security benefits. No. You may never deduct contributions to a Roth IRA.
Do I have to file a form just because I contribute? Not unless you make nondeductible contributions to your traditional IRA. In that case, you must file Form 8606. No. You do not have to file a form if you contribute to a Roth IRA.
Do I have to start taking distributions when I reach a certain age? Yes. You must begin receiving required minimum distributions by April 1, of the year following the year you reach age 70½. No. If you are the original owner of a Roth IRA, you do not have to take distributions regardless of your age. However, if you are the beneficiary of a Roth IRA, you may have to take distributions.
How are distributions taxed? Distributions from a traditional IRA are taxed as ordinary income, but if you made nondeductible contributions, not all of the distribution is taxable. Distributions from a Roth IRA are not taxed as long as you meet certain criteria.
Do I have to file a form just because I receive distributions? Not unless you have ever made a nondeductible contribution to a traditional IRA. If you have, file Form 8606. Yes. File Form 8606 if you received distributions from a Roth IRA (other than a rollover, qualified charitable distribution, one-time distribution to fund an HSA, recharacterization, certain qualified distributions, or a return of certain contributions).

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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