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Traditional IRA

 

  Education & Retirement Planning > Individual Investors > Traditional IRAsWhat is the deadline for contributing to an IRA? What is the deadline for contributing to an IRA for 2018? How much can I contribute to my IRA for 2018 or 2019? What are the IRA contribution limits for 2018 and 2019?

What is an Individual Retirement Account? What is an IRA? IRA Definition

What is a Traditional IRA?


Traditional IRAs

Roth IRAs

Rollover IRAs IRA FAQs

Funding Reference

 

Traditional IRA Contribution Limits 2017

 

Traditional IRA Contribution Limits 2018

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     Get Important Information Regarding your IRA Brokerage Account

 

What is an Individual Retirement Account?What is an IRA? IRA Definition

How Can an IRA Help Me? Get the Facts about IRAs

What are the benefits and drawbacks of investing in an IRA? This page offers educational information that you may use in addition to consulting with your tax advisor to see if an IRA may be right for you. (For Payroll Deduction IRAs or information on other retirement plans available through your employer: please call us at 919-719-7200 today.)

Jump to a section by clicking one of the links below: 

Traditional IRA Basics

Get more info at IRS.gov

What is a Traditional IRA?

Why participate in a Traditional IRA?

Traditional IRA Contribution Limits

Traditional IRA Deductibility Limits

Traditional IRA Non-Deductible Contributions

What does it mean to contribute to an IRA?

What is a catch-up contribution? When can I make a catch-up contribution?

Important Things to Remember about Contribution Limits  

Traditional IRA Rollover Contributions

Regular IRA Rollover

Important Things to Remember about IRA Rollovers

Direct Rollover

Important Things to Remember About Direct Rollovers

What is a Conduit IRA?

IRA Distributions

Withholding

Basis of In-Kind Distributions

Required Minimum Distributions (RMD) at Age 70 1/2

Follow the links above to get more information on IRAs and other retirement accounts available at Place Trade as well as information on rollovers and guidance that is specific to your IRA account. Please call us at 800-50-PLACE or 91719-7200 for help opening your IRA today!

 

 

When is the IRA Contribution Deadline?

You may make an eligible contribution to your Traditional or Roth IRA at any time prior to the IRS tax filing deadline for that year. The tax deadline is usually on April 15th of the following year, however, this may change in observance of state and federal holidays. Please note that brokerage account clients may have an earlier deadline in order to process your contribution in time. Full-service clients may fund accounts through this date.

Please call us at 919-719-7200 for more information and how we may still get your IRA funded before the deadline!

 

 

 

What is a Traditional IRA? Definition

A Traditional IRA is any Individual Retirement Arrangement that is not a RothSEPSIMPLE, or Qualified Plan (including Individual 401(k), or a Coverdell ESA.

 

How do IRA's work?

What are the benefits of Traditional (Individual) IRAs?

 

  • The key benefit of a Traditional IRA is tax-deferred growth. Your investments grow free of federal income taxes until money is withdrawn.

 

  • You can set up and make contributions to a Traditional IRA if you (or, if you file a joint return, your spouse) received taxable compensation during the year and you were not age 70 1/2 by the end of the year.

 

  • You can have a Traditional IRA whether or not you are covered by an additional retirement plan. 
    • However, you may not be able to deduct all of your contributions if you or your spouse are covered by an employer retirement plan.

 

Eventually, you must pay federal income tax on investment earnings and any IRA contributions that you have deducted. Please consult your tax and/or legal advisor for details. For more information visit www.irs.gov.


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Is an IRA the same thing as a 401(k)?  401k   Are is an IRA and 401k the same thing?

No, while both retirement plans offer the potential for tax-deferred growth, the plans are quite different in many ways. IRAs are set up by individuals for their own retirement. 401(k)s are set up by employers for the benefit of their employees. Both the employer and employee can contribute to an employee's 401(k) account. Click here to learn more about:

 


 

Why participate in a Traditional IRA?

 

  • Contributions to a traditional IRA may be deductible

 

  • No limit on the number of contributions per year

 

  • No limit on the number of IRA accounts Earnings in an IRA accumulate tax-free until distributed IRA accounts can be used as a "channel" for distributions from a qualified plan

 

  • Any participant under the age of 70 1/2 with compensation can participate in a traditional IRA

Please Note: Due to changing laws, it is always best to review your individual circumstances with a qualified Tax Advisor.  


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What does it mean to contribute to an IRA?

Contributing to an IRA means that you are depositing money that you earned from working in the tax year for which you are making the deposit. The money may only be from "earned income" (not from dividend, interest or other income). The amount that you may contribute to an IRA and whether or not your contribution will receive tax-favored treatment depends on a number of factors including the type of IRA, your income, whether or not you (or your spouse) have a retirement plan at work and other factors. Learn more about contribution and deductibility limits below.

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How much can you contribute to an IRA? in 2018?

Traditional IRA Contribution Limits

You may make an eligible contribution for your 2018 Traditional or Roth IRA at any time prior to the 2018 IRS tax filing deadline which is April 15, 2019. (Your account must be funded or have proof of postmark by this date!)

What is a catch up contribution? What is a catch up contribution for an IRA? 

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What is a catch-up contribution? 

A catch-up contribution is an additional amount that the IRS allows individuals to contribute to their retirement accounts once they have reached the age of 50 and greater. This amount allows individuals to put more money aside in tax-favored accounts to help them catch up with their retirement savings or, in other words, make up for lost time. 

 

When can I make a catch-up contribution? When can I make a catch up contribution?

You may begin making catch-up contributions once you turn 50. 

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How do you fund an IRA?

 

Traditional IRA Contribution Limits ~ 2017 & 2018

 

Under Age 50  

 

Total

Under Age 50  

Over Age 50

Additional 

 Total

Over Age 50

2017* **

$5,500

Catch-up Contribution

$1,000

$6,500

2018* ** $5,500 Catch-up Contribution $1,000 $6,500

                                                                                                                                                                                                                                                               Source: irs.gov

"Total" means your total contributions to all of your Traditional and Roth IRAs. You cannot exceed the total amount/contribution limit regardless of how many IRAs that you have or the type/types of IRA(s) that you may have

*Or your taxable compensation for the year.                                                                                                                                                           

** Effective for the tax year 2002 and beyond, for participants who are eligible to make an IRA contribution and have attained the age of 50 before the end of the taxable year, the participant can make a "catch-up" contribution in addition to the normal contribution amount as shown in the table above. The catch-up contribution was $500 from 2002-2005. For the year 2006 and beyond, the catch-up contribution limit will be $1000. The maximum contribution cannot exceed 100% of actual compensation. Learn more about COLA Increases for Dollar Limitations on Benefits and Contributions from the IRS.

Please note that the IRA contribution limit does not apply to:

Deductibility limits can be confusing and tax laws are frequently changing. It is always best to review your specific situation and/or circumstances with a qualified tax advisor.

 


What is a catch up contribution? What is a catch up contribution for an IRA? 

What is a catch-up contribution? 

A catch-up contribution is an additional amount that the IRS allows individuals to contribute to their retirement accounts once they have reached the age of 50 and greater. This amount allows individuals to put more money aside in tax-favored accounts to help them catch up with their retirement savings or, in other words, make up for lost time. 

 

When can I make a catch-up contribution? When can I make a catch up contribution?

You may begin making catch-up contributions once you turn 50. 

 

How do you fund an IRA?

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Call us at 1-800-50-PLACE or 1-919-719-7200 to speak with an experienced retirement specialist to help you rollover your old retirement account or help you start planning for retirement today! 


 
 

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Traditional IRA Deductibility Limits

 

Are you eligible to participate in an employer-sponsored plan?

If the IRA participant is not eligible to participate in an employer-sponsored plan, the IRA contribution is fully deductible, regardless of the participant's income. This includes singlehead of householdor qualifying widow(er) as well as married filing jointly or separately with a spouse who is not covered by a plan at work.

Are you considered to be an "active participant" by the IRS?

If the IRA participant is an "active participant", then the IRA deductibility is determined by the participant's adjusted gross income. The table above shows the deductibility limits for active participants for tax years 2016 and 2017. This includes married filing jointly with a spouse who is covered by a plan at work

*Please note that if you are married and file separately and did not live with your spouse at any time during the year, your IRA deduction is determined under the "single" filing status.

Are either you or your spouse is covered by a retirement plan at work?

If neither spouse is covered by a retirement plan at work, there is no AGI limit. If your filing status is single, head of household, qualifying widow(er), married filing jointly or separately with a spouse who is not covered by a plan at work, then there is no AGI limit and you may take a full deduction. See IRS Publication 590 for more information.

Please Note: Deductibility limits can be confusing, so it is always wise to review your specific situation with your tax advisor.


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Traditional IRA Non-Deductible Contributions

 

  • Non-deductible contributions are contributions that exceed the deductibility limit but not the contribution limits. The deductibility limits only affect a participant's ability to take a deduction, not his ability to contribute. Any person under the age of 70 1/2 with compensation can contribute to a Traditional IRA, regardless of compensation.
  • Non-deductible contributions can earn tax-deferred income. Only the earnings will be taxable to the IRA participant when distributed. Upon distribution, the non-deductible contributions are recovered on a pro-rata basis.
  • The participant must inform the IRS that he has made a non-deductible contribution by filing IRS Form 8606 with his tax return.
  • An IRA participant may remove his non-deductible contributions (plus any applicable earnings) for a given tax year prior to the tax filing deadline (including extensions) for that year. Only the earnings will be taxable.


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Important Things to Remember:

 

Contribution Limits:

  • There is no minimum contribution limit per the IRS. However, most brokerage firms, mutual fund, and investment management companies do require account minimums so please be sure to inquire prior to investing.
  • The maximum contribution amount for an individual is the lesser of 100% of compensation or $5,500 per year (for 2016) and $5,500 (for 2017). Plus any catch-up contributions
  • For a married couple with a non-working spouse (or a working spouse who is not covered by an employer-sponsored plan), the maximum contribution for the couple is the lesser of 100% of compensation or $11,000, with no more than $5,500 contributed for each individual (for 2016) and $11,000, with no more than $5,5000 for each individual (for 2017). Separate IRAs must be established for each spouse, and the couple must file a joint tax return. The catch-up contribution limit for 2016 and 2017 remains at $1,000 and is limited to a combined total of $13,000 for 2016 and $13,000 for 2017 ($1,000 for each spouse - this example assumes that each spouse is over age 50).

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Talk with an IRA Rollover Specialist Today Call 1-800-50-PLACE


Traditional IRA Rollover Contributions

Regular IRA Rollover

A distribution from a qualified retirement account (Qualified PlanSIMPLE, SEP, 457, 403(b) and Traditional IRA) that is redeposited into the same IRA or another IRA within 60 days of the date of distribution is considered a rollover contribution. If the entire amount of the distribution is redeposited, there will be no taxable distribution. If only part of the distribution is redeposited, the amount that is not redeposited will be subject to taxes and possibly penalties.  (For information on Roth IRAs please visit our  Roth IRA's page.)

Learn the facts about Rollover IRAs


 

Important Things to Remember about IRA Rollovers:

  • For assets to be eligible for rollover they must have come from a retirement account that has had no rollover contributions, nor distributions within the prior 12 months.
  • An IRA participant may complete only one rollover of the same assets within a 12-month period.
  • An IRA participant may roll over any assets, either cash or non-cash, but he must redeposit the same assets that were originally distributed.
  • An IRA participant may not rollover a required minimum distribution.
  • A rollover is a reportable transaction. The distribution is reported on IRS Form 1099R. The rollover contribution (redeposit) is reported on IRS Form 5498.

 

Check out the Retirement Plan Rollover Chart

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Talk with an IRA Rollover Specialist Today Call 1-800-50-PLACE


 

Direct Rollover

The deposit of assets from a qualified plan directly into an IRA account (or the subsequent deposit of these assets into a successor qualified plan), without receipt by the IRA participant, is considered a direct rollover.

Learn more about 401(k) Rollovers

Changing Jobs? Know all of your options when it comes to what to do with your old 401(k) retirement plan so that you can make the decision that is right for you!

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Things to Remember About Direct Rollovers:

 

By completing a direct rollover of assets from a qualified plan, the IRA participant can avoid the mandatory 20% withholding of federal taxes (plus a likely additional amount for state taxes) on distributions from a qualified plan.

Learn about Tax Reporting for IRA Rollovers into your Place Trade IRA

.

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What is a Conduit IRA? 

The IRA account that holds direct rollover assets is often referred to as a "Conduit IRA".

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IRA Distributions

Earnings in an IRA account can accumulate tax-free until they are distributed to the IRA participant. Once distributed, earnings and deductible contributions are taxed as ordinary income.

Because the purpose of an IRA account is to provide a retirement income, the IRS imposes an additional tax of 10% of the amount of the distribution if the IRA participant takes a distribution before the age of 59 1/2.

The IRS does allow several exceptions to this 10% additional tax, including:

  • Distributions to the IRA participant's beneficiaries upon the participant's death.
  • The disability of the participant.
  • Distributions that are taken annually as a series of substantially equal payments (based on the participant's life expectancy) until the participant reaches the age of 59 1/2 or until 5 years have elapsed, whichever is longer.
  • Qualified first time home purchase.
  • Qualified medical expenses in excess of 7 1/2% of AGI (adjusted gross income).
  • Qualified medical insurance premiums during a period of unemployment.
  • Qualified educational expenses.
  • As the result of an IRS tax levy.

Distributions are reported to the IRS on Form 1099R.

Learn about how tax reporting for your account by visit: Tax Information and Reporting 

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Tax Withholding

All distributions from an IRA account are subject to 10% Federal withholding tax unless the IRA participant elects to waive this withholding. The IRA withholding waiver election must be in writing and will stay in effect until the IRA participant revokes the election. 

 

Basis of In-Kind Distributions

The basis of in-kind distributions from an IRA account is the fair market value of the assets on the date of distribution. In-kind distributions made on the FSI SDIRA system are valued at the asset's prior night closing price.

 

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Required Minimum Distributions (RMD) at Age 70 1/2

The IRA account is intended to provide a retirement income for the participant, not to provide a death benefit for the participant's beneficiaries. According to Internal Revenue Service (IRS) regulations, you must begin to take required minimum distributions (RMD) from your retirement account once you attain the age of 70 1/2.

  • The amount of the distribution is determined by dividing the prior end of year fair market value by a life expectancy factor. For tax purposes, required minimum distributions are included in the participant's gross income, and the rules for recovery of non-deductible contributions apply.
  • These distributions must commence by April 1st of the year following the year in which you attain the age of 70 1/2, and must be taken by December 31st each year thereafter.
  • Distributions that are taken annually as a series of substantially equal payments (based on the participant's life expectancy) until the participant reaches the age of 59 1/2 or until 5 years have elapsed, whichever is longer.
  • The RMD is based on your attained age, a life expectancy factor, and the prior year-end value of the retirement account. The IRS will impose a 50% penalty on the amount of the required minimum distribution that is not distributed to the IRA participant.
  • Deductibility limits can be confusing and tax laws are frequently changing. It is always best to review your specific situation and/or circumstances with a qualified tax advisor.

 


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How much does an IRA earn per year?

It is important to note that an IRA is, on its own, not an actual investment security like an individual stock or bond. It is more like an investment vehicle and is actually referred to as an "arrangement" through which the IRS allows individuals to save for retirement with tax favorable benefits (you can think of it like a box that holds individual investments). IRAs may hold a wide variety of investments ranging from traditional stocks, bonds, options, ETFs, mutual funds and CDs to investment properties including rental homes and much more.

Because an IRA is not an actual investment, an  IRA does not "earn" a specific percentage rate. The investments which are held inside of the IRA may earn interest or dividends or may have gains (or losses) depending on the types of investments that are held inside of the IRA itself. For example, if you hear that an IRA earns or is paying a certain percentage, APR, etc., it is likely that you are hearing a bank referencing the rate that they are paying on CDs or an insurance company referring to a fixed annuity that is held within an IRA, it is not the actual IRA that is paying that rate.   


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View Traditional IRA Contribution and Deduction Limits Set by the IRS (Click)

 


Call us today at 1-800-50-PLACE (1-800-507-5223, 919-719-7200) to get started!
 

 

(Please be sure to check with your tax and/or legal advisor prior to making any contributions, withdrawals or other changes to your retirement account.  Place Trade Financial, Inc. does not offer tax or legal advice.  Information provided by Place Trade is for educational purposes and should not be considered as tax or legal advice under any circumstances.)     

  

 Learn about IRAs, Traditional IRAs, Roth IRAs, Minimize taxes with qualified contributions to your retirement account.  Make "Catch-up contributions" if you are over 50.  Learn about income limits/deduction limits for Single, Head of household, Qualified widow or widower, married filing jointly, married filing separately, spouse not covered by plan at work, spouse, no plan at work, plan at work, lived with spouse, agi, adjusted gross income, ira deduction, full deduction, partial deductions and so much more!

 

Call us today at 1-800-50-PLACE (1-800-507-5223, 919-719-7200) for more information!

 

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Learn more about retirement planning by visiting some of the links below:

Roth IRA

SEP IRA

SIMPLE IRA

Traditional IRA

Qualified Plans

Rollover IRAs

Find out how Place Trade can help you get the most out of your college planning by visiting some of the links below:


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