IRA FAQs - Best IRA Providers

Confused what an IRA is and what the benefits of getting one are? Our experts will help you decipher through the confusing subject to help you understand the intricacies of opening an Individual Retirement Account.

What is an IRA?

What are the Benefits of an IRA?

How do I Get an IRA?

Who Can Contribute to an IRA?

How Much Can I Contribute to an IRA?

What is the Deadline for my IRA Contribution?

Can I Invest in Both a Roth and a Traditional IRA?

How Do I Rollover My 401K?

When Can I Take out Funds from my IRA?

Is my IRA Tax Deductible?

Can my Spouse be Added to my IRA?

What is an IRA?

An IRA (Individual Retirement Arrangement or Account) is a financial tool for retirement savings that provides tax advantages. There are several types of IRAs, with the most common being the Traditional IRA and the Roth IRA. The various types of IRAs are designed for different individual situations and have different tax advantages. IRA contributions are typically invested in stocks, mutual funds, or other investments depending on the type of IRA account.

What are the Benefits of an IRA?

The foremost benefit of an IRA is that money contributed in an IRA grows tax-deferred, which means that money earned in an IRA investment will not be taxed until it is withdrawn. In a Traditional IRA, money can be contributed on an after-tax basis or on a pretax basis depending on certain conditions. A pretax basis means that IRA contributions may be deducted from your taxable income depending on your adjusted gross income, filing status, and participation in an employer-sponsored plan, such as a 401K. In a Roth IRA, your contributions are not tax deductible, but your withdrawals after retirement will not be not taxed. Roth IRAs are especially attractive to individuals who expect to be in a higher tax bracket after retirement.

How do I Get an IRA?

IRAs are available from many financial institutions and investment firms such as banks and brokerages. Your choice of which institution to use for your IRA will depend on whether you want to manage the account yourself or have others do most of it for you. Opening an IRA is similar to opening an ordinary savings account, and contributions are simple to make.

Who Can Contribute to an IRA?

You can contribute to a Traditional IRA if you have taxable income and are not age 70½ or older. Even minors who have an income can open an IRA.

How Much Can I Contribute to an IRA?

For 2015, the maximum you can contribute to all of your combined IRAs is the smaller of $5,500 (an additional $1,000 is permitted if you are age 50 or older) or your taxable income for the year.

What is the Deadline for my IRA Contribution?

The deadline for contributing to IRA savings is the same as your tax return filing deadline not counting any extensions. For 2015, contributions may be made to IRAs until April 15, 2015.

Can I Invest in Both a Roth and a Traditional IRA?

Yes, you can invest in Roth IRAs and Traditional IRAs at the same time. If you do, keep in mind that your total contributions to all of your Roth IRAs and Traditional IRAa cannot exceed $5,500 (or $6,500 if you are age 50 or older).

How Do I Rollover My 401K?

A 401K rollover is a simple process that can be handled by most financial institutions that offer IRAs. This allows you to transfer your existing 401K retirement account into an IRA without incurring unnecessary taxes or withdrawal penalties.

When Can I Take out Funds from my IRA?

You can take money out of your IRA at any time, but you may have to pay taxes. All deductible contributions and earnings withdrawn or distributed from your Traditional IRA are taxable. Furthermore, you will have to pay an additional 10% tax for early withdrawals if you are under age 59 ½ unless you qualify for an exception. In a Roth IRA, you can withdraw contributed funds without taxes at any time because those funds have already been taxed. However, if you withdraw earnings from a Roth IRA before age 59 ½, you will be penalized for an early withdrawal. After age 59 ½, you can make withdrawals from any IRA at any time without penalties. The only exception is if you have a Roth IRA that is less than five years old.

Is my IRA Tax Deductible?

Contributions to your IRA are tax deductible up to the annual contribution limit of $5,500 (or $6,500 if you are age 50 or older).

Can my Spouse be Added to my IRA?

You cannot add your spouse to your own IRA because it is an individual retirement account. However, your spouse can contribute to his or her own IRA if he or she earns a taxable income. If your spouse does not earn an income, you can contribute to a spousal IRA on your spouse's behalf.