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About IRAs
  • Basics

    About Individual Retirement Accounts (IRAs)

    An IRA is designed to help you grow your money for retirement. We know the financial markets can be uncertain and full of risk, which is why we offer low risk IRA products such as CDs and savings accounts that offer more consistent returns and are FDIC-insured. Having an IRA CD account with Ally Bank is a safe and secure way to grow your retirement savings.

    Here's how IRAs work

    Step 1: Pick a Plan

    • Traditional IRA
      A retirement savings plan designed for tax-deferred growth that you don’t pay taxes on until you withdraw money once you reach retirement. You might be able to deduct your contributions on your tax return, depending on your income level.
    • Roth IRA
      A retirement savings plan designed for tax-free growth, a Roth IRA allows you to make tax-free withdrawals of any original contributions you made at any time. Please be aware that there are maximum income restrictions to be eligible to contribute to a Roth IRA.
    • SEP IRA
      A retirement savings plan designed for tax-deferred growth that provides a way for small business owners to contribute to a retirement plan for themselves and any other eligible employees.

    Step 2: Add Products

    Choose to add IRA CDs, IRA Online Savings Accounts, or a combination of both to any Ally IRA plan.

    IRA High Yield CD
    IRA Raise Your Rate CD
    IRA Online Savings Account

    We recommend that you work with a tax professional to determine what combination will help you meet your retirement goals.

    Compare IRA Plans and Products

    Get more details about our IRA products and plans, contribution and distribution requirements, and tax advantages in the comparison chart.

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  • Contributions

    Making IRA annual contributions

    One way to deposit funds into your IRA is by making contributions. There are some restrictions placed on how you can add money to IRAs.

    Traditional IRAs — If you’re younger than age 70 ½ and have taxable compensation, you can make a contribution. In some cases, your contributions are tax-deductible in the year they are made and the money you add to your account grows tax-deferred until you take it out in retirement.

    Roth IRAs — If you have taxable compensation and meet the eligibility requirements, you can make contributions at any age and qualified distributions are tax free. Keep in mind: your Roth IRA contributions are not tax-deductible.

    SEP IRAs — Employers can make retirement contributions for themselves and on behalf of their employees. Personal contributions into a SEP IRA are not permitted.

    Contribution requirements

    Get more details on the contribution eligibility requirements and annual deadlines in the comparison chart.

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  • Distributions

    Taking IRA Distributions

    Withdrawing money from your IRA is referred to as taking a distribution. IRAs were designed to save money for retirement, with distributions being made after you reach 59 ½ years of age. You can take IRA distributions at any time, but CD early withdrawal penalties and an additional IRS tax may apply.

    Traditional IRAs — Distributions are taxable, and if you’re younger than age 59 ½ you could be subject to an additional 10% IRS tax penalty. Minimum distributions are required once you reach age 70 ½.

    Roth IRAs — Distributions of your original contribution are always tax free. If you‘re 59 ½ or older and have met the IRS’ 5-year holding period, all of your distributions are tax free. If you’re younger than age 59 ½, however, you could be subject to an additional 10% IRS tax penalty. There are no minimum required distributions.

    SEP IRAs — Distributions are taxable, and if you’re younger than age 59 ½, you could be subject to an additional 10% IRS tax penalty. Minimum distributions are required once you reach age 70 ½.

    Distribution Requirements

    Get more details on the Required Minimum Distributions (RMDs) and age requirements in the comparison chart.

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  • Rollovers & Transfers

    Rollovers and Transfers

    Rollovers

    A rollover is moving funds from one retirement savings account or plan, like an old IRA or 401K, to a new or consolidated IRA. Rollovers from an IRA are subject to federal income tax unless you complete the transaction within 60 days of receiving the funds. Also, IRAs can be part of a tax-free rollover only once in a single calendar year. This means, if you make a tax-free rollover of a distribution from an IRA, you can’t make another rollover from the same IRA within that same year.

    Direct rollovers

    A direct rollover is when funds are moved from your workplace retirement plan directly to your IRA. Since you never hold the funds, there are no taxes withheld.

    Trustee-to-Trustee Transfers

    A trustee-to-trustee transfer is moving funds from one IRA to another IRA. The money is transferred directly from one IRA to another on your behalf. Transfers can take place as often as you like, and they are not taxable.

    We recommend you work with a tax professional to help you make the best decision for your retirement goals.

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  • Roth IRA Conversion

    Converting a Traditional IRA to a Roth IRA

    If you are thinking about converting a Traditional IRA to a Roth IRA, here are a few things to consider:

    • Paying taxes — You’ll be taxed on the amount you’re converting from your Traditional IRA to the new Roth IRA. You can pay these taxes using funds from your IRA; however, this will reduce the benefit of converting by lessening the Roth IRA plan balance and limiting future growth.

    • Your age — If you are close to retirement, converting a Traditional IRA to a Roth IRA may not be the best choice for you. You’ll have less time to make up for the tax impact of the Roth IRA conversion.

    • Current tax benefits — The income you report at the time of conversion could push you into a higher tax bracket, excluding you from other tax benefits, such as child and higher education tax credits.

    • Retirement income — If you end up in a lower tax bracket upon retirement, the taxes you pay on your distributions could be less than the rate you would pay on a conversion today.

    • Inheritance plan — A Roth IRA doesn’t require minimum withdrawals during the life of the IRA owner, so the full amount may be passed to the beneficiary.

    We recommend that you work with a tax professional to help you make the best decision for your situation.

  • FAQs

    Frequently asked questions

    Contributions

    • Are there income, contribution and other limits for IRAs?

      Yes. The IRS establishes limits for IRAs, depending on what type of plan you choose. Check out our IRA comparison chart for more details. You may want to check with the IRS or a tax professional to find out what limits may apply to you.

    • What is considered eligible income for an IRA contribution?

      The IRS defines eligible income as: wages, salary, tips, professional fees, bonuses, taxable alimony, commissions resulting from profits or sales, income earned if you are self-employed and the sole proprietor of a business, and the income you receive as a partner for providing services. Anything not listed here is ineligible income.

    • When can I make contributions to my Traditional or Roth IRA?

      For the current tax year you can contribute to your IRA anytime during the calendar year and before the official April IRS filing due date – not including extensions. Go to www.irs.gov for specific information.

      For IRA CDs, after you’ve made an initial funding deposit, you won’t be able to add more money until the CD reaches maturity. You’ll have a 10-day grace period, starting at the maturity date, to make any changes.

      Annual IRA contribution limits may apply. Consult your tax professional for advice.

    • What's the difference between an IRA Rollover and an IRA Transfer?

      An IRA Rollover is the movement of assets from an IRA or qualified retirement plan, like a 401(k) plan or 403(b) plan, to an Ally Bank IRA. Rollovers could be subject to tax consequences. Please consult your tax advisor regarding frequency of rolling over funds.

      An IRA Transfer moves funds directly from the trustee or custodian at another institution to an Ally Bank IRA. For example, from a Traditional IRA at your other bank into your Traditional IRA at Ally Bank.

      Get the facts about IRAs, which explains different ways to move your retirement money around and how to convert one type of IRA plan to another, such as Traditional to Roth. You can also visit the IRS for more information.

    • Can I contribute to an IRA if I have a retirement plan with my employer?

      Yes. Keep in mind that your ability to deduct your IRA contributions on your taxes may be affected by the fact that you (or your spouse) are covered under your employer's retirement plan. Please check with the IRS or your tax professional for more information.

    Distributions

    • When can I withdraw money from my Traditional IRA?

      You can withdraw money from your Traditional IRA at any time; however, if you are under the age of 59½, the Internal Revenue Service (IRS) could charge you a 10% tax. There are exceptions, so please check with the IRS or your tax professional before making a withdrawal.

    • Am I required to take distributions at a certain age from my IRA?

      It depends. If you have a Traditional or SEP IRA, the IRS requires that you take an annual minimum distribution by April 1st of the year following the year you turn 70½. The amount of your distribution depends on how much you have in your account divided by your life expectancy. Check with the IRS or your tax professional for more information on how to calculate your distribution amount.

      If you have a Roth IRA, you don't have to take an annual minimum distribution, so your money can grow until you need it.

    • What are the IRA distribution guidelines for withholding?

      It's always best to consult with a tax professional before making any decisions about tax withholdings on your distribution.

      For Traditional IRAs and SEP IRAs, the IRS requires us to withhold 10% in federal income taxes from your IRA distributions unless you tell us not to withhold this amount or to withhold more than 10%.

      For Roth IRAs, the IRS does not typically require us to withhold federal income tax on qualified Roth IRA distributions. An exception to the general rule applies to conversions from a Traditional IRA to a Roth IRA; then, we are required to automatically withhold 10% on the amount converted. You can also choose not to withhold or withhold at greater than 10% on this amount.

    Beneficiaries

    • How many beneficiaries can I have on my IRA?

      You can have up to 6 total beneficiaries (primary and contingent) for each IRA.

    • What is the difference between a primary and contingent beneficiary?

      Your primary beneficiaries are the people who will receive the funds in your account at your death. Contingent beneficiaries will receive these funds if all primary beneficiaries are deceased.

    • How can I change or add to my IRA beneficiaries?

      You can change or add beneficiaries any time by logging on to online banking, calling us at 1-877-247-2559, or completing and mailing the Change of Beneficiary form.

      If you are married and would like to appoint a primary beneficiary other than or in addition to your spouse, you must submit a notarized Change of Beneficiary form that includes your spouse's signature. Before making any changes, however, you may wish to consult with a tax professional or the IRS for more information.

    General

    • What is an Individual Retirement Account (IRA)?

      An Individual Retirement Account (IRA) is a retirement savings account with tax advantages. Ally offers three types of IRA plans: Traditional IRA, Roth IRA and SEP IRA (Simplified Employee Pension).

    • What's the difference between a Traditional IRA and Roth IRA?

      With a Traditional IRA, you prefer your money to grow tax-deferred until you withdraw it in retirement. In many cases, your contributions are tax-deductible in the year they are made.

      A Roth IRA may be a good option if you're interested in both tax-free growth and withdrawals. Your Roth IRA contributions are not tax-deductible.

      You may want to check with your tax professional to discuss the benefits of each type of IRA.

    • What is a SEP IRA (Simplified Employee Pension)?

      A SEP IRA is an IRA that allows contributions to be made by an employer on behalf of an employee. Business owners and anyone who is self-employed can also use this type of IRA to save for retirement. Please note that IRS guidelines prohibit employees from making personal contributions to their SEP IRA.

    • Can I convert a Traditional IRA to a Roth IRA?

      Yes, although this may result in you having to pay some taxes on your earnings from the Traditional IRA once you convert to a Roth IRA. Check with your tax professional to see if this is a good option for you.

    • Does Ally offer Savings Incentive Match Plan for Employees (SIMPLE) IRAs?

      At this time, Ally only offers Traditional, Roth and SEP IRAs.