User:Fyre4ce/IRA

🇺🇸 An individual retirement arrangement, or IRA, is a personal savings plan which allows you to set aside money for retirement, while offering you tax advantages. You may be able to deduct some or all of your contributions to your IRA. Amounts in your IRA, including earnings, generally are not taxed until distributed to you. IRA's cannot be owned jointly. However, any amounts remaining in your IRA upon your death can be paid to your beneficiary or beneficiaries.

You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. You can also open an IRA through your stockbroker. Any IRA must meet Internal Revenue Code requirements.

ICI (Investment Company Institute) reports that at year end 2018, Traditional IRA's held an estimated $8.806 trillion of investor's wealth accounting for 85% of total IRA assets,

Types of IRAs
The User:Fyre4ce/Traditional IRA was created in 1974 with the passage of the Employee Retirement Income Security Act (ERISA) Over the years, the Traditional IRA has been expanded to include a growing number of specialized plan types. These include:

See Roth versus Traditional for more guidance on how to choose between pre-tax and Roth contributions.

Other IRA terminology
In addition, various terms are used to describe specific types of IRAs that fit into the above categories, and some have specific legal implications. These terms include:

Required Minimum Distributions
Traditional, SEP, and SIMPLE IRAs have Required Minimum Distributions that generally begin the year the account holder reaches age 72. See the main page for a discussion of the details.

Inherited IRAs (Traditional and Roth) inherited prior to January 1, 2020 have Required Minimum Distributions calculated by IRS Publication 590-B Distribution Table I. Inherited IRAs (Traditional and Roth) inherited after January 1, 2020 have no RMDs, but must be emptied and closed within ten years of being inherited, unless certain exceptions apply.

Roth IRAs have no RMDs.

Penalties: Early Withdrawals and Excess Contributions
Early Withdrawals

Early withdrawals are generally amounts distributed from your traditional IRA account before you are age 59 1/2. You must pay a 10% additional tax on the distribution of any assets from your traditional IRA before you are age 59 1/2.


 * Exceptions to the penalty apply if the early withdrawal is:
 * made to a beneficiary or estate on account of the IRA owner's death,
 * made on account of disability,
 * made as part of a series of substantially equal periodic payments over your life or life expectancy,
 * made to pay for a qualified first–time home purchase,
 * not in excess of your qualified higher education expenses,
 * not in excess of certain medical insurance premiums paid while unemployed,
 * not in excess of your unreimbursed medical expenses that are more than a certain percentage of your adjusted gross income, or
 * due to an IRS levy.

Excess Contributions

Contributing more than the allowed amount in any year to your traditional IRA also subjects you to an additional tax. Any excess contribution not withdrawn by the date your tax return for the year is due (including extensions) is subject to a 6% tax. You must pay the 6% tax each year on excess amounts that remain in your traditional IRA at the end of your tax year.

IRS

 * Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs), (PDF)
 * Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs), (PDF)
 * IRS Publication 590 Individual Retirement Arrangements (IRAs), 2013. Superseded by 590-A and 590-B.
 * IRS Whats New: IRAs and Other Retirement Plans