Individual Retirement Account (IRA)

An Individual Retirement Account, or IRA, is an account that allows you to set aside money for retirement while getting a tax benefit. The two main types of IRAs are traditional IRAs and Roth IRAs. Each type has a different set of tax advantages, rules, and limits that may make them the right choice for your situation.

Roth IRA Details

• You pay taxes on the money you put in the account, but withdrawals are not taxed.
• You can withdraw your contributions (but not earnings) at any time without taxes or IRS penalties.
• After you reach age 59-1/2, you can withdraw contributions and earnings without taxes.
• There are no age limits to open or contribute to a Roth IRA.
• There are no required distributions at any time.
• Eligibility and contribution amounts could be limited by your income.

Traditional IRA Details

• The money you put in the account may be tax deductible, but withdrawals in retirement are taxed.
• Contributions can be used to lower your taxable income.
• You must begin taking a minimum amount out of the account, called a required minimum distribution, at age 73.
• Distributions before age 59-1/2 trigger a 10 percent early withdrawal penalty in addition to being included as taxable income, with a few exceptions for specific circumstances.

IRA Contribution Limits

• The contribution limit is the maximum combined amount you may put into traditional and Roth IRAs.

*Once you reach age 50, you are able to contribute up to $1,000.00 more than the regular maximum contribution limit. This is referred to as a catch-up contribution.

• You can’t contribute more than you earn.
• Contributions for the 2023 tax year can be made until April 15^th, 2024.

IRA Income Limits

• Income is measured by your modified adjusted gross income (AGI).
• For Roth IRAs, high earners are able to contribute less, and if your income is over the limit you may not be able to contribute at all.