Q&A: Your Top Questions About IRAs Answered

Introduction

Individual Retirement Accounts (IRAs) are one of the most effective tools for building long-term wealth and preparing for a secure retirement. Yet, many people feel overwhelmed by the rules, limits, and choices.

Don’t worry—you’re not alone. In this Q&A, we’ll answer the most common questions about IRAs, so you can make confident, informed decisions about your financial future.

---

❓ What Is an IRA?

An Individual Retirement Account (IRA) is a tax-advantaged investment account that allows you to save for retirement.

There are different types of IRAs, but they all have the same purpose: to help your money grow over time through investments like stocks, bonds, mutual funds, and ETFs.

---

❓ What Are the Main Types of IRAs?

✅ Traditional IRA

• Contributions may be tax-deductible.
• Investments grow tax-deferred until you withdraw funds in retirement.
• Withdrawals are taxed as ordinary income.

✅ Roth IRA

• Contributions are made with after-tax dollars (no tax deduction).
• Investments grow tax-free.
• Qualified withdrawals in retirement are also tax-free.

✅ SEP IRA & SIMPLE IRA

• Designed for self-employed individuals and small business owners.
• Allow higher contribution limits than Traditional and Roth IRAs.

---

❓ How Much Can I Contribute to an IRA?

For 2024, contribution limits are:

• Under age 50: $7,000 per year
• Age 50 and older: $8,000 per year (includes a $1,000 catch-up contribution)

Note:

• These limits apply per person, not per account.
• You must have earned income to contribute.

---

❓ What’s the Difference Between a Traditional and Roth IRA?

Feature	Traditional IRA	Roth IRA
Contributions	May be tax-deductible	Not tax-deductible
Growth	Tax-deferred	Tax-free
Withdrawals	Taxed as income	Tax-free (if qualified)
Income Limits	No limits to contribute	Income limits apply
RMDs (after age 73)	Required Minimum Distributions	None during your lifetime

Tip: If you expect to be in a higher tax bracket later, a Roth IRA may be advantageous.

---

❓ Can I Have Both a Traditional and Roth IRA?

Yes! You can open and contribute to both, as long as your combined contributions don’t exceed the annual limit.

Example:

• $3,500 contributed to a Roth IRA
• $3,500 contributed to a Traditional IRA

Total: $7,000 (limit for under 50)

---

❓ Who Can Contribute to a Roth IRA?

To contribute to a Roth IRA, your income must be below certain limits:

For 2024:

• Single filers: Contribution begins to phase out at $146,000, eliminated at $161,000.
• Married filing jointly: Phases out at $230,000, eliminated at $240,000.

---

❓ When Can I Withdraw Money?

✅ Traditional IRA:

• Withdrawals before age 59½ typically incur a 10% penalty + taxes.
• Exceptions include disability, first-time home purchase (up to $10,000), and certain medical expenses.

✅ Roth IRA:

• You can withdraw contributions anytime tax- and penalty-free.
• Earnings are tax- and penalty-free if you’re over 59½ and the account has been open at least 5 years.

---

❓ What Are RMDs?

Required Minimum Distributions (RMDs) are mandatory withdrawals from Traditional IRAs starting at age 73.

• You must take at least the minimum amount each year.
• If you don’t, the IRS imposes a steep penalty—25% of the amount you should have withdrawn.

Roth IRAs do not require RMDs during your lifetime.

---

❓ Can I Roll Over a 401(k) to an IRA?

Absolutely. After leaving a job, you can roll over your 401(k) into a Traditional IRA (or Roth IRA if you’re willing to pay taxes on pre-tax dollars).

Benefits of a rollover:

• Keep all your retirement savings in one place.
• Often have more investment options and lower fees.

---

❓ How Do I Open an IRA?

Opening an IRA is simple:

1. Choose a provider (brokerage, bank, robo-advisor).
2. Complete an application online or in person.
3. Fund the account via bank transfer or rollover.
4. Select investments aligned with your goals.

---

✨ Conclusion

IRAs are a powerful way to save for retirement, reduce taxes, and grow wealth over the long term. Whether you choose a Traditional or Roth IRA, the key is to start as early as you can and contribute regularly.