Understanding IRAs

IRA image

As tax season is upon us it is always good to get refreshed on the different types of IRA accounts that exist.  You have until you file your taxes (sometimes as late as October 15th) to make IRA contributions for the previous tax year.  So there is still time to make 2013 contributions.  You can contribute up to $5,500 in an IRA for 2013 ($6,500 if you are over age 50).

Here is a summary of the different types of IRA accounts.

  • Rollover IRA

    • May have more choices and lower fees than a 401(k).
    • No taxes or withdrawal penalties at time of transfer.
    • Funds can continue to grow tax-advantaged.
  • Traditional IRA
    • Contributions may be tax-deductible.
    • Withdrawals are taxed as current income during retirement.
    • No income limitations.
  • Roth IRA
    • Contributions are not tax-deductible.
    • Withdrawals are generally tax- and penalty-free after 5 years and after age 59½.
    • Income eligibility limitations.
  • Custodial IRA
    • For children under age 18 who have earned income.
    • Can be a Traditional or Roth IRA.
    • Funds can be used to pay for college.
  • Inherited IRA
    • For those who inherit a non-spousal Traditional or Roth IRA.
    • Tax-deductible contributions or IRA conversions aren’t allowed.
    • Annual distributions are required.


If you are self employed or have your own business there are many more options available as well.