Open your Traditional IRA today!
The Traditional IRA, often called a Rollover IRA, can be used by anyone who earns or whose filing-jointly spouse earns “taxable compensation,” until age 72. The Traditional IRA is widely known for its tax advantages, as the account owner does not pay taxes upfront, and the contributions can be tax deductible. There are no income limits on who is eligible to enroll in a Traditional IRA, but not everyone can potentially receive a tax deduction. All growth within the account is tax deferred but you must pay taxes upon distribution. You can take distributions at any time, however, a 10% penalty is applied if you take a distribution before you are 59 1/2. Age 59 1/2, distributions are penalty free but taxed as current income. You also must begin taking RMDs, or required minimum distributions, at age 72 and can no longer make contributions. For 2020 and 2021, the contribution limit for the Traditional IRA is $6,000 and also allows for a $1,000 “catch-up” for those over the age of 50.
Answers to some of the most frequently asked investing questions (FAQs) about Traditional IRAsCan I buy real estate with a Traditional IRA?
*Processes will vary by custodian.
Check out this video to see the most common questions about Traditional IRAs answered
2020 & 2021 Contributions:
- $6,000 for 2020 | $6,000 for 2021
- $1,000 catch-up (Age 50+)
REMEMBER: You must qualify to contribute to a Traditional IRA. Annual contribution limits apply to the combined Traditional and Roth IRAs of an individual.
What are the benefits of a Traditional IRA?
- Tax Deductible Contributions
- No Income Limits on Participation
- Bankruptcy Protection
- Inheritance – you can pass assets onto beneficiaries after death.
It’s easy to invest with a Self-Directed Traditional IRA!
- Open a Traditional IRA account at Quest
- Fund your account by rolling over an old 401K, transferring money from another IRA, or making a contribution
- Invest in what you know best!
Submit Your Forms: All forms can be mailed or faxed to any of our locations or emailed to AccountServices@QuestTrust.com
Tax Filing Status 2020 Tax Year Single or Head of Household $65,000 – $75,000 Married Filing Jointly $104,000 – $124,000 Married Filing Separately $0 – $10,000 Tax Filing Status 2021 Tax Year Single or Head of Household $66,000 – $76,000 Married Filing Jointly $105,000 – $125,000 Married Filing Separately $0 – $10,000
Claiming a Tax Deduction for your IRA Contribution
Your Traditional IRA contributions may be tax-deductible. The amount of deduction is dependent on your gross income (MAGI) and if you or your spouse is covered by a retirement plan at work.
For single tax filers, the phase out range for 2020 is $65,000 – $75,000 and $66,000 – $76,000 for 2021.
For married couples filing jointly, where one spouse’s IRA contribution is covered by a work retirement plan, the phase out range for 2020 is $104,000 – $124,000 and $105,000 – $125,000 for 2021.
For married couples filing separately, where the individual is covered by a work retirement plan, the phase out range for 2020 & 2021 is $0-$10,00.
For spousal IRA contributions, the deduction is phased out if the couple’s income in 2020 is $196,000-$206,000 and $198,000 – $208,000 for 2021.
2021 Traditional IRA Distribution Rules
- A Traditional IRA Distribution is taxed as income for the tax year of the distribution.
- If you withdraw a distribution before the required age of 59.5, you are subject to a 10% early withdrawal penalty.
- Distributions are optional between the ages of 59.5 and 72. Once you hit 72, Required Minimum Distributions (RMD) begin.
- The required minimum distribution is calculated:
- (Fair Market Value of IRA) ÷ (life expectancy of IRA account holder)