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A Traditional Individual Retirement Account (IRA) is one of the most common types of retirement savings accounts. It is a great way to increase the amount you are saving for retirement.
Income within the account grows tax-deferred. Only when the funds are withdrawn from the account as a distribution will there be a potential tax liability.
Better yet, contributions made into the account each year may provide a tax-deduction equivalent to the same amount contributed (subject to government guidelines and income limitations). At the time of retirement, most individuals find themselves in a much lower tax bracket than they were while they were employed. This means that they pay a lower tax rate on those funds than they would have during the years they were placed in the account.
One of the most notable benefits of a Traditional IRA is the fact that funds are tax-deferred while in the account. That means that any gains are also tax-deferred until withdrawn from the account.
Contributions to a Traditional IRA may be tax deductible, provided you meet certain requirements.
Another important factor when considering Traditional IRAs is the Required Minimum Distribution requirement when you turn age 70 1/2.
Keep in mind that distributions from your IRA can be subject to a 10% early distribution penalty tax if you are under age 59 1/2, unless a penalty tax exception applies.
There is a “catch-up” period of which you may contribute $1,000 more to your account. This is only permissible if the account owner is age 50 or older. Note: The account owner can no longer make regular contributions, including catch-up contributions, beginning with the tax year that he or she will attain age 70 1/2.
FIRST TIME HOME BUYER
Up to $10,000 can be withdrawn from a Traditional IRA penalty-free, if the money is used to acquire a principal residence for a first-time home buyer. The owner of the home must be the Traditional IRA’s owner, their spouse, or their lineal ancestors and descendants. The individual cannot have owned a home in the previous 24 months.
NOTE: Please visit www.irs.gov for a complete breakdown of the rules and regulations concerning Traditional IRAs. Certain restrictions apply regarding prohibited transactions.
|For Tax Year 2019|
|Under Age 50||$5,500||$6,000|
|Catch-Up Contribution (Age 50 or Older)||$1,000||$1,000|
|Total Contribution Amount (If Age 50 or Older)||$6,500||$7,000|
TRADITIONAL IRA MAGI LIMITS
|For Tax Year 2019|
|Single Active Participant||$63,000 – $73,000||$64,000 – $74,000|
|Married Active Participant (Filing Jointly)||$101,000 – $121,000||$103,000 – $123,000|
|Married Active Participant (Filing Separately)||$0 – $10,000||$0 – $10,000|
|Nonactive Participant, Married to Active Participant (Filing Jointly)||$189,000 – $199,000||$193,000 – $203,000|
We do not offer investment, tax, financial, or legal advice to clients. Individuals who believe they need advice should consult with qualified professional(s) licensed in that area. This section of our website is devoted to providing clients and potential clients with educational information. It is in no way intended as tax advice.
Frequently Asked Questions
How do your fees differ from other custodians who handle traditional & alternative assets?
Most custodians of traditional assets collect fees and/or commissions based off of the amount of trades or recommendations of investment choices. For our full fee schedule, click here.
Can Provident Trust Group provide tax or legal advice regarding your investment?
What types of investments are prohibited with retirement accounts?
The IRS does not state which investments are permissible in a qualified account or retirement plan, but they do state specific asset classes that are prohibited. The IRS currently prohibits IRAs from investing in Life Insurance, Collectibles and S-Corps. Some examples of collectibles, include:
- Metals – with exceptions for certain kinds of bullion,
- Coins – (but there are exceptions for certain coins),
- Alcoholic beverages, and
- Certain other tangible personal property.
For more information, click here for the IRS Website.
Can my account invest with other partners, including myself?
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