An IRA is an Individual Retirement Account. There are generally two types of IRAs: the Traditional IRA and the Roth IRA. Each offers its own unique advantages, as well as certain restrictions, while both offer a broad array of investment vehicles (Certificate of Deposit, mutual funds, etc.).
Talk to one of our Financial Consultants to confirm the amount allowed in annual contributions (may vary based on your age).
Both Traditional and Roth IRAs also provide you with some flexibility should you need to dip into your savings to fund specified expenses, such as buying your first home or paying for your children’s education.
In 2016 and 2017, the maximum you can contribute to all of your Traditional and Roth IRAs is the smaller of
$5,500 ($6,500 if you're age 50 or older), or
Your taxable compensation for the year.
Effective January 1, 2015, the IRS began enforcing a new interpretation of the rule that limits the number of nontaxable IRA rollovers. Previously, the IRS allowed one rollover per 12-month period from each IRA an individual owned. Based on the new tax code and subsequent ruling by the U.S. Tax Court, IRA owners will be allowed to complete only one IRA-to-IRA rollover per 12-months, regardless of how many IRAs they own. Please contact a tax consultant should you have questions regarding this new rule. For additional resources and information regarding IRA rollovers, visit http://www.irs.gov/Retirement-Plans/IRA-One-Rollover-Per-Year-Rule.
Traditional IRAs* often allow tax-deductible contributions and offer tax-deferred earnings. This means that you do not need to pay taxes on the money you contribute until you withdraw it from the account. Additionally, you don’t pay taxes on the money the investment earns until you make a withdrawal.
Taxes are paid on the money you contribute to a Roth IRA, so that earnings can be withdrawn tax-free after age 59½, provided the account has been open at least five years.
*A Roth IRA must be open at least five years prior to withdrawals being taken, and normal tax rates will apply for withdrawals from a Traditional IRA. Unless certain criteria are met, IRS penalties (usually 10%) may apply on withdrawals taken from Traditional IRA accounts prior to age 59½, in addition to income taxes.