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What is an IRA (Individual Retirement Account)?

IRAs come in two forms and have different approaches to saving:

Traditional IRA – A Traditional IRA is a tax-deferred retirement account meaning you save today and are taxed when you withdraw the money. The age limit to contribute is 70½.  Depending on eligibility, contributions may be tax deductible for the year for which contributions are made

Roth IRA – In a Roth IRA, you don’t get any tax deductions for the contribution today, but can withdraw the assets when you retire without paying taxes. There’s no age limit to contribute. However, if your Roth IRA account is not at least 5 years old or if you’re not yet 59 ½, the earnings portion of the withdrawal may be subject to taxes and a 10% penalty, unless an exception applies.

And unlike with Traditional IRAs, the IRS does not require the original account holder of a Roth to take any required minimum distributions (RMDs) when they reach age 70½. You control when you want to withdraw your money. If you don’t need the money in your Roth, you can leave it alone and it may continue to be tax free – and so will any potential growth.


What else you should consider

  • Penalties – If you withdraw money from your IRA before age 59½, you may be required to pay a 10% IRS penalty in addition to income taxes – but there are exceptions. Refer to the IRS website for a complete list of exceptions or consult your tax professional.
  • Required Withdrawals – When you reach age 70½, the IRS generally requires you to withdraw a minimum amount each year. These are called “required minimum distributions,” or RMDs.
  • Contribute All Year – You can contribute to a Traditional IRA throughout the year and up until your tax-filing deadline – usually around April 15.


These questions and answers are intended to provide general information on federal tax laws governing IRAs and not intended to provide legal advice.  For specific information, you are encouraged to consult your tax or legal professional.