Individual Retirement Accounts

About IRAs

Types of Individual Retirement Accounts

  1. Traditional Individual Retirement Accounts (IRA)
  2. Roth IRA’s
  3. Simple IRA’s
  4. SEP IRA’s

Traditional IRA’s in 2022

Traditional Individual Retirement Accounts (IRA) are personal savings plans that are tax-deductible. In most circumstances taxes on these accounts are not taxed until a withdrawal is taken. Withdrawals taken before age 59 1/2 incur a 10% penalty. Withdrawals taken after age 59 1/2 are taxed at your ordinary income tax rate. Once your reach age 70 1/2 you are required to take annual distributions, called a Required Minimum Distribution.

Early Withdrawal Penalty Exemptions

  • You have unreimbursed medical expenses that are more than 7.5% of your AGI.
  • The distributions aren’t more than the cost of your medical insurance due to a period of unemployment.
  • You are totally and permanently disabled.
  • You are the beneficiary of a deceased IRA owner.
  • You are receiving distributions in the form of an annuity.
  • The distributions aren’t more than your qualified higher education expenses.
  • You use the distributions to buy, build, or rebuild a first home.
  • The distribution is due to an IRS levy of the IRA or retirement plan.
  • The distribution is a qualified reservist distribution.
  • The distribution is a qualified birth or adoption distribution.
Rock Steady Wealth, Inc Fiduciary Investment Advisor Individual Retirement Account

2022 Traditional & Roth IRA Contribution Limits

  • $6,000
  • $7,000 if you are 50 years old or older
  • Equal to or less than your AGI if it is less than $6,000 for those less than 50 years old or $7,000 for those equal to or greater than 50 years old

2022 Tax Deduction Limits for Traditional Individual Retirement Accounts

  • If you are single, married filing jointly or separately, head of household, or a qualifying widow(er) and you are not covered by an employer retirement plan (401k, 403b,457b, SEP IRA, Simple IRA)you may deduct the full amount of your IRA contribution up to the contribution limit
  • If your spouse is covered by an employer retirement plan and you file jointly and your AGI is $204,000 or less you may deduct the full amount of your IRA contribution up to the contribution limit. The deduction phases out from $204,001 to $214, 000 in AGI. There is no deduction for this circumstance for those making over $214,000 in AGI.
  • If your spouse is covered by an employer retirement plan and you file separately and your AGI is less than $10,000 you may take a partial deduction, and for any amount over $10,000 there is no deduction.

Roth IRA’s

Roth IRA’s are another type of Individual Retirement Account, however contributions are not tax deductible. They follow many of the same rules are Traditional IRA’s, but the primary benefit is distributions from Roth IRA’s after age 59 1/2 are not taxable. Realized gains are not taxed in these accounts so it allows your money to grow tax free over the life of the account.

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Information gathered from IRS.gov, links below:

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