Important Information Relating to Ira Rules

One of the most common retirement options in the United States is the Individual Retirement Account (IRA) which is governed by various IRA rules. There are three kinds of accounts, namely the Traditional IRA, the Roth IRA and the Simple IRA. Some of the IRA rules are the same for each of the accounts but there are certain differences in relation to eligibility, limits for contributions and withdrawals.

The first account, the Traditional IRA, stipulates that you must be less than 70 years old to open an account. You will also be required to make contributions from your salary, commissions and any bonuses you receive. The current standard contribution limit is $5,000. As well as this, if you are over the age of 50, a catch up contribution amount of $6,000 applies. If you decide to withdraw money from the Traditional IRA before the age of fifty-nine and a half you will be charged a penalty.

There is no restriction on age for the Roth IRA and so most people can have this type; the only requirement is that you can make the contributions into the account. The current limit for the standard contribution limit is $5,000. The catch up contribution amount is $6,000. After the first 5 years of making contributions you can withdraw money from the account. Penalties will be applicable before the age of fifty-nine and a half. You can withdraw funds from a Roth IRA if you intend to buy your first home or become classed as disabled.

The Simple IRA differs slightly to the two other accounts. It can only be offered to employees by their employer. No other plans such as 401k are allowed. The employee’s have to have made over $5,000 per annum to qualify for this scheme. The current deferment amount is $11,500 and catch up contribution for over 50’s is $2,500.

Withdrawing from a Simple IRA follows the same IRA rules as the Traditional IRA, with one exception. The “2 year period” rule means that any funds withdrawn within the first 2 years of the account will be subject to a penalty of 25%, not 10%.

The 401k rollover is closely linked with the different IRA’s, apart from the Simple IRA. If you decide to leave your current employer for a new one, then you will need to find out about your 401k rollover options.

It is possible to transfer funds from your 401k plan to an IRA if you change occupations. This is done by your employer before or just after you leave your job. By moving your money in this way, you can avoid paying penalties and paying tax.

If you are thinking about opening and IRA account or want to get more information on the IRA rules, you will find a wealth of information on the internet. You can also approach a financial expert to answer any queries you have.