Savings with a tax advantage – your IRA plan
Each Individual Retirement Account (IRA) has different characteristics. Which one you choose will depend on the lifestyle you expect during retirement. Within each retirement plan, you can have more than one (1) IRA product. These products include IRA High Yield CDs, IRA Raise Your Rate CDs, and IRA Online Savings Accounts.
The Traditional IRA offers the advantage of tax-deferred growth before retirement. This means you don't pay taxes on your savings until you withdraw money from your IRA in retirement. You may also be able to deduct your contributions on your tax return depending on your income level.
You are eligible to make a contribution to a Traditional IRA if:
- You are younger than age 701/2 and you have taxable compensation.
The Roth IRA offers the advantage of tax-free growth for your retirement. Keep in mind that Roth IRAs are subject to a 5-year holding period. To avoid losing the favorable tax treatment available for Roth IRAs, it is important that you monitor the holding period.
You are eligible to make a full contribution to a Roth IRA for 2013 if:
- Your income does not exceed $112,000 if you file an individual tax return; $178,000 if you file jointly or are a widow(er)
Contribution limits begin to decrease when income levels exceed these amounts.
If you already have a Traditional IRA, you may want to look at the benefits of converting from a Traditional IRA to a Roth IRA.
The Simplified Employee Pension (SEP) IRA provides a method for business owners to make contributions to a retirement plan for themselves and any eligible employees.
Can I own more than one IRA? Yes, you can have more than one IRA and more than one type of IRA. For example, you may choose to have two Traditional IRAs or a Traditional and a Roth IRA, etc. However, the aggregate annual contribution limit remains unaffected. That is, in 2013, you can contribute up to $5,500 total ($6,500 if you are age 50 or older).
As you approach retirement, your financial needs may change. And for some people, having multiple IRA plans can help address those changes. The same annual contribution and distribution limits will still apply.
At Ally Bank, we offer Traditional, Roth and SEP IRAs, and you can choose more than one. However, to determine which IRA is right for you, we recommend you talk to a tax professional.