Individual Retirement Accounts
These are special tax deferred savings plans authorized by the Federal Government to encourage you to accumulate money for retirement. Individuals who are under 70 1/2 years of age for the entire tax year and have earned compensation or received alimony may contribute to a Traditional IRA. All earnings you accumulate in your IRA remain tax deferred until you make withdrawals from the account. You may withdraw funds from your IRA any time after you reach age 59 1/2. Distributions taken prior to age 59 1/2 are generally subject to a 10% early withdrawal penalty unless certain exceptions apply.
A Roth IRA is an individual retirement account to which participants are able to make annual non-deductible contributions. Unlike a Traditional IRA in which your earnings are tax deferred, Roth IRA earnings can be tax free. You can keep contributing to your Roth IRA even after you have reached age 70 1/2, provided you have earned income. You can also withdraw funds from your Roth IRA at any time without tax and penalty free if you meet the conditions as set by the Internal Revenue Service.
You can open or fund your Individual Retirement Account anytime until your federal tax return is due, which is normally, April 15 of the following year, excluding extensions. You are permitted to annually contribute certain amounts or 100% of your earned compensation and alimony, whichever is less. Always seek the advice of a tax advisor before making a contribution or distribution from your IRA.