IRA Accounts

TRADITIONAL / ROLLOVER IRA-2024

• An IRA can be established by most individuals who have earned income, and they can contribute up to $7,000 ($8,000 if you are age 50 or older) per year into an IRA if the earned income is at least equal to the amount contributed. All, some or none of that $7,000 ($8,000 if you are age 50 or older) may be tax deductible.
   
• A full $7,000 ($8,000 if you are age 50 or older) deductible contribution per person is available for each working couple if joint income is below $218,000.  No income limit for single filers (up to your contribution limit). Partial deductibility is available for married persons with couple’s incomes between $218,000 and $228,000 in 2024.
   
• A deductible IRA cannot be established by individuals who participate in various company, agency or not for profit retirement plans: SEP IRA, SIMPLE IRA, 401(k), 403(b), 457 plans, Deferred Compensation Plans, etc., unless their income is below $77,000 for individuals, and below $123,000 for married couples in 2024.
   
• An individual who is not active in a company plan, but whose spouse is active, may make a deductible contribution to an IRA, if their income is below $230,000 in 2024.
   
• Dividends, interest and capital gain growth within an IRA are not taxable and monies eventually removed are taxable as ordinary income. Taxes must be paid upon withdrawal of any deducted contributions plus earnings, and on the earnings from your non-deducted contributions.  Withdrawals prior to age 59 1/2 may be subject to taxes, and a 10% IRS penalty.
   
• Avoidance of 10% IRS penalty (but not taxes) on withdrawals prior to age 59 1/2 is available if owner takes substantially equal periodic payments over his/her life expectancy based on IRS life expectancy tables. You need to do this for at least five years.
   
• Distributions- Under the SECURE Act of 2019, the RMD age for a terminated participant increased from 70½ to 72 effective in 2020. SECURE 2.0 again changes the RMD age to 73 in 2023, and ultimately to age 75. The chart below highlights the changes to the RMD age at relevant points in time.

• One can withdraw a lifetime maximum of $10,000 (contributions and earnings) without taxes or penalties for a first time home purchase.
   
• Various investment choices available.
   
• Withdrawals from traditional IRAs can be made without penalty (conditions may apply) for: higher educational expenses, disability, death, health insurance while unemployed, large medical bills for non-reimbursable expenses that are greater than 10% of your adjusted gross income for the year or purchase of your first house.

ROTH IRA

• A Roth IRA can be established by most individuals regardless of age who have earned income below a certain specified threshold.
   
• A Roth IRA can be established by individuals who participate in various company, agency or not for profit retirement plans: SEP IRA, SIMPLE IRA, 401(k), 403(b), 457 plans, etc.
   
• Up to $6,500 ($7,500 if you are age 50 or older) per year per participant can be contributed to a Roth IRA if the earned income is at least equal to the amount contributed.
   
• A full $6,500 ($7,500 if you are age 50 or older) non-deductible contribution is available for each working couple if joint income is below $218,000 and below $138,000 for single filers
   
• No contribution is allowed when modified family annual gross income reaches $218,000 or more per year for married couples and $138,000 or more for single filers.
   
• Contributions to a ROTH IRA are not tax deductible.  Dividends, interest and capital gain growth within a ROTH IRA is not taxable and monies eventually removed are tax-free if account is owned at least 5 years and owner is over 59 1/2.
   
• Beginning January 2024, RMDs are no longer required from designated Roth accounts. A participant who is required to begin RMDs due to a termination of employment in 2023, must still receive their 2023 RMD from their Roth account by April 1, 2024.
   
• At any age, after the account is opened 5 years, one can withdraw a lifetime maximum of $10,000 (contributions and earnings) without taxes or penalties for a first time home purchase.
   
• At any age, for any reason, one can withdraw the amount(s) contributed (not earnings) without tax or penalties.
   
• Various investment choices available.

SIMPLE IRA

A SIMPLE IRA plan is usually set up by small business owners who want to provide a retirement plan for their staff and unlike the 401(k) plan, the SIMPLE IRA rules are very easy to understand.

In order to qualify to set up such plan, business owners may employ up to 100 employees. Each worker who earns a minimum of $5,000 dollars during the preceding calendar year is qualified to take part in the plan.

The rules for withdrawing funds from the account are quite similar to the rules of the traditional IRA with a few exceptions.

None of the information in this document should be considered tax or legal advice.  You should consult your legal or tax advisor for information concerning your individual situation. Tax services are not offered through, or supervised by Lincoln Investment or Capital Analysts.