An In-Depth Look at IRAs
IRS rules and guidelines about IRAs can get complicated, but at Citizens Commerce, we're always willing to help. The guide below has some basic information about Individual Retirement Accounts, and if you need more information, a customer service representative will be happy to sit down with you to talk through your questions and concerns.
Contribution and Distribution Requirements
The minimum balance for both Traditional and Roth IRAs is $2000.00. Certain investments may require different minimums.
Annual Maximum Contribution
In one year, an investor may make IRA contributions totaling more than $5000 or more than 100% of his annual income. Contributions to Coverdell Savings Accounts are not included in this total, and investors age 50 or older may contribute an extra $1000 yearly.
The contribution deadline for IRAs is the tax filing deadline, April 15 of the following year.
An IRA accountholder must begin to receive withdrawals at age 70½. A beneficiary of an IRA (unless a beneficiary is the accountholder’s spouse) must begin to receive withdrawals upon accountholder’s death.
If you want to move your retirement funds out of an employer-sponsored plan, you may want to consider putting them in a Rollover IRA. You can convert that IRA into a Traditional IRA or a Roth IRA, or you can preserve its status as a conduit Rollover IRA if you make no additional contributions.
Rollover IRAs have no minimum balance, though certain investments may require minimum balances. Rollover IRA withdrawals are subject to federal income taxes, and a 10% penalty may apply to withdrawals made before an accountholder is 59½.
Traditional IRAs vs. Roth IRAs
There are two types of IRAs – Traditional IRAs and Roth IRAs. Each has its own benefits, but both come with tax advantages. The chart below will help you understand the differences between the two types, and when you work with Citizens Commerce, a customer service representative will help you choose the IRA and the investments that work best to fit your goals.
|Traditional IRAs||Roth IRAS|
|Great for those who:
Expect to be in a lower tax bracket during retirement.
Please note: not all investors are eligible for tax-deductible contributions.
Expect to be in the same tax bracket or a higher one during retirement.
|Contributions can only be made before the year that an IRA owner turns 70½.
Roth IRAs are not available for taxpayers with single AGI over $110,000 or joint AGI over $160,000.
There are no age restrictions on contributions.
|Deductible Contributions||Contributions may or may not be deductible, depending on accountholder's income and participation in employer-sponsored retirement plan.||Contributions are never tax deductible.|
Taxation on Early Withdrawals
Withdrawals of earnings and deductible contributions are subject to income tax. Withdrawals of non-deductible contributions are not taxed.
A 10% federal tax penalty applies to withdrawals made before age 59½, except in the case of:
Contributions may always be withdrawn without taxes or penalties.
Earnings may be withdrawn without taxes or penalties if:
Withdrawals which do not meet the requirements above will be subject to income tax and may be subject to a 10% federal tax penalty.