Baron Financial Group’s New Investor Blog Series will consist of monthly blog posts that provide general information on a range of investment topics. The series aims to provide new investors with basic investment information.
*This blog post is the first in the series*
A 60-second read by the Baron Team: What is an IRA? An IRA is an Individual Retirement Account. There are two types of IRAs – Traditional and Roth.
Traditional IRA:
- Who is eligible? Anyone can invest in an IRA if they are under the age of 70 ½ and are still working
- How much can you contribute? For 2019, you can contribute up to $6,000 per year based on your earned income (or $7,000 if you are over the age of 50)
- What are the tax implications? Investment income and growth is tax-deferred until you begin to make withdrawals
- Are contributions tax-deductible? Yes (In most Cases)
- Are there withdrawal penalties? Yes, withdrawals made before age 59 ½ are subject to a 10% penalty (There are exceptions)
- What are the distribution rules? Withdrawal is mandatory starting at age 70 ½
Roth IRA:
- Who is eligible? Working taxpayers with gross income below $137,00 or $203,000 for married couples for 2019 tax year (Phaseouts apply)
- How much can you contribute? For 2019, you can contribute up to $6,000 per year based on your earned income (or $7,000 if you are over the age of 50)
- What are the tax implications? With Roth IRAs you pay taxes upfront, so withdrawals made upon retirement are tax-free
- Are contributions tax deductible? No
- Are there withdrawal penalties? None, if a qualified distribution
- What are the distribution rules? No requirement to make withdrawals by age 70 ½
What are the main differences between the two?
Continue reading “New Investor Blog Series from BFG – IRA Basics”
