IRAs

What does Roth IRA's offer for taxes?

-Contributions are not tax deductible -Excess contributions are subject to a 6% tax penalty -Grows tax free (if account open for at least 5 years) -Contributions are not tax deductible (made with "after-tax dollars") -Qualified distribution cannot occur until account is open for 5 years and owner is 59 1/2, distributions are not taxable -Nor required minimum age for payouts

Qualified

-Contributions currently tax deductible -Plan approved by the IRS -Plan cannot discriminate -earnings grow tax deferred -all withdrawals are taxed

What does Traditional IRAs offer for taxes on contributions made?

-Contributions must be made in cash in order to be tax deductible (any form of money, such as cash, check, or money order.) -Excess contributions are taxed at 6% per year as long as it remains in the IRA -Money accumulated in the account are not taxed until withdrawn.

What is a direct rollover?

-Distributions are made directly from the first plan to the trustee or administrator/custodian of the new IRA plan. Avoiding the 20% withhold -If distribution is paid directly to the participant, 20% of the distribution must be withheld by the payor

What is a Roth IRA?

-Form of an individual retirement account funded with after-tax dollars. -Contributions can continue regardless of the account owner's age -Distributions do not have to begin by age 72 like traditional IRA -Grows tax free as long as the account is open for 5 years.

What conditions would make it so the 10% charge for early withdrawal in a Traditional IRA would not apply?

-Participant is age 59½; -Participant is totally disabled; -The money is used to make the down payment on a home (not to exceed $10,000, and usually for first-time homebuyers) -Withdrawals are for post-secondary education expenses -Withdrawals are for catastrophic medical expenses, or upon death.

What does Traditional IRAs offer for taxes on distribution?

-Subjected to income taxation in the year the withdrawal is made -Early distribution prior to age 59 1/2 will receive a 10% penalty

What is a rollover>

-Tax-free distribution of cash from one retirement plan to another -Must be completed within 60 days from the time the money is taken out of the first plan

What does the term transfer (direct transfer) refer to?

-Tax-free transfer of funds from one retirement program to a traditional IRA or -transfer of interest in a traditional IRA from one trustee directly to another.

What can spouses who are the sole beneficiary do with their spouses Traditional IRA?

-Treat an IRA as their -own -Base the required minimum distribution (RMD) on their own current age; -Base the required minimum distribution on the decedent's age at death, reducing the distribution period by one each year -Withdraw the entire account balance by the end of the 5th year following the account owner's death, if the account owner died before the required beginning date. -If the account owner died before the required beginning date, the surviving spouse can wait until the owner would have turned 72 to begin receiving RMDs.

What can individual beneficiaries do with a Traditional IRA upon death?

-Withdraw the entire account balance by the end of the 5th year following the account owner's death, if the account owner died before the required beginning date; -Calculate RMDs using the distribution period from the IRS Single Life Table based on the beneficiary's age at year-end following the year of the owner's death, reducing the distribution period by one for each subsequent year.

What can you do as a married couple with a traditional IRA?

-You can contribute a specified amount that is double the individual amount. -Each spouse needs a separate account that doesn't exceed the individual amount though. -Can be off of one income.

nonqualified

-contributions not currently tax deductible -plan does not need IRS approval -Plan can discriminate -Earnings grow tax deferred -excess over cost basis is taxed

When it comes to traditional IRAs when can you withdraw funds and explain about the process.

-owner may withdraw funds at any time -prior to 59 1/2 are considered early withdrawals and you will get a 10% additional tax. -Starting at 59 1/2, you may withdrawal without having to pay the 10%

Traditional IRA (Individual Retirement Account)

Allows individuals with earned income to make tax deductible contributions regardless of age.

What is the required minimum distribution(RMD)?

In a traditional IRAs the owner must at least withdraw the minimum annual amount of their funds by age 72

What did the Secure Act of 2019 do to Traditional IRAs?

it removed the prior age limit for all contributions starting in tax year 2020.

Vesting

the right of a participant in a retirement plan to retain part or all of the benefits