Individual Retirement Accounts (IRA)

What is an Individual Retirement Account (IRA)?

It is an account that receives tax treatment similar to a retirement plan through work (if you qualify), but that you manage on your own. IRA accounts typically can hold many types of investments, such as stocks, bonds, mutual funds, and other types of investments. They typically come as either a traditional IRA or as a Roth IRA.

What is a Traditional IRA?

Traditional IRAs are usually funded with qualified (pre-taxed) money, but it is also possibly to contribute using after-tax dollars if you have too much income to deduct your contribution. Investments are typically capped at $5,000 per year though the amount can increase as you grow older, typically starting when you are 50 and over. You must also begin withdrawing money at the age of 70 ½ as with all other qualified accounts. A rollover IRA is usually a Traditional IRA.

What About Roth IRAs?

Roth IRAs carry the same investment opportunities as traditional IRAs but the money invested is non-qualified (taxed) meaning any interest and profit earned is tax free at the time of withdrawal assuming key conditions are met. An added bonus to Roth IRAs is that you can withdraw your contribution from the account without penalty (they have already been taxed). Investments are counted separately from your traditional IRA account. Like a traditional IRA, Roth IRAs are typically capped at $5,000 but can become greater as you grow older. Additionally, at 59 1/2 as long as you have had the account for 5 years, you can withdraw principle and interest without penalties.

Would you like to learn more about your options? Please contact us or set an appointment.