Traditional IRAs

Individual retirement arrangements were introduced in 1974 with the enactment of the Employee Retirement Income Security Act (ERISA). An IRA is an account set up at a financial institution that allows an individual to save for retirement with tax-free growth or on a tax-deferred basis.

With a Traditional IRA you make contributions with money you may be able to deduct on your tax return, and any earnings can potentially grow tax-deferred until you withdraw them in retirement.

Traditional IRA Highlights

  • Contributions you make to a traditional IRA may be fully or partially deductible, depending on your circumstances.
  • Generally, amounts in your traditional IRA (including earnings and gains) are not taxed until distributed.
  • You can contribute if you (or your spouse if filing jointly) have taxable compensation but not after you are age 70½ or older.
  • You have until your tax return filing dealine (not including extensions) to make your contribution. This date is usually April 15th.
  • If you are under 59-1/2 you may have to pay an additional 10% penalty on early withdrawals.
  • You must start taking Required Minimum Distributions (RMD) by April 1 following the year in which you turn 70-1/2.

Traditional IRA Contribution Limits

For 2017:

$5,500 if you are under 50 years old.

$6,500 if you’re age 50 or older by the end of the year

Required Minimum Distributions

You cannot keep retirement funds in your account indefinitely. You generally have to start taking withdrawals from your IRA when you reach age 70½. Your required minimum distribution (RMD) is the minimum amount you must withdraw from your account each year.

  • You must start taking Required Minimum Distributions (RMD) by April 1 following the year in which you turn 70-1/2.
  • After the first year you must take your RMD by the end of the calendar year.
  • Your withdrawals will be included in your taxable income.
  • You can withdraw more than the minimum required amount.

Inherited IRAs

  • An inherited IRA is an IRA that passes to a beneficiary at the death of the IRA owner.