ACCOUNT TYPE
Traditional IRA
The gold standard IRA that can meet the needs of just about any investor. If you have earned income, you can contribute to a Traditional IRA.
AT-A-GLANCE
What should you know about a Self-Directed Traditional IRA?
Tax Benefits
- Contributions (deposits) are deductible from your income for tax purposes.
- Investment earnings are tax deferred.
- Distributions (withdrawals) are taxed as income, but ideally at retirement age when you’re in a lower income tax bracket.
Other Benefits
- Employer plans, such as 401(k)s, 403(b)s, Thrift Savings Plans, etc., can be easily rolled into a Traditional IRA.
- With a Traditional IRA, you can invest in real estate, private loans, precious metals, or any other alternative investment option of your choosing.
DISTRIBUTION RULES
What should you know about Traditional IRA distributions?
Minimum Distribution Facts
- With a Traditional IRA, you must begin taking the required minimum distributions at age 72.
- The required minimum will vary each year based on your age and your account balance, as of December 31, the prior year.
Early Distribution Facts
- Traditional IRA distributions are considered “early” if taken prior to age 59 ½ and subject to taxes and 10% penalties.
| BELOW AGE 59½ | AGE 59½ - 72 | AGE 72 OR OLDER | |||
|---|---|---|---|---|---|
| You may distribute cash or assets from your Traditional IRA at any time, though a 10% early distribution penalty will apply. This penalty will be assessed on top of any applicable taxes. | Upon reaching age 59½, you will no longer have to worry about the 10% early distribution penalty. Withdrawals will be taxed as regular income and need only occur at your election. | You must begin taking required minimum distributions (RMDs) every year. RMDs are calculated in accordance with your age and your account value. |
BELOW AGE 59½You may distribute cash or assets from your Traditional IRA at any time, though a 10% early distribution penalty will apply. This penalty will be assessed on top of any applicable taxes. |
|
AGE 59½ - 72Upon reaching age 59½, you will no longer have to worry about the 10% early distribution penalty. Withdrawals will be taxed as regular income and need only occur at your election. |
|
AGE 72 OR OLDERYou must begin taking required minimum distributions (RMDs) every year. RMDs are calculated in accordance with your age and your account value. |
Contributions
If you have earned income for a given year, you can make a Traditional IRA contribution of your personal money for that year. You can contribute up to $6,000 per year in 2020 and 2021. Account holders age 50 and older may contribute an additional $1,000 per year.
Transfers
The following account types can be transferred to or from a Traditional IRA: Traditional IRA, SEP IRA, SIMPLE IRA (if the SIMPLE has been open for at least two years)
Rollovers
The following account types can be rolled into or from a Traditional IRA: 401(k), 403(b), 457(b), Thrift Savings Plan
OTHER INVESTMENTS
ROI is everywhere if you know where to look.
No financial advisor knows you better than yourself. With a Self-Directed IRA you have the freedom to invest your tax-advantaged retirement funds in the assets you’re most passionate about. From real estate to startups to small businesses to more “out there” opportunities, if you can find it, we will help you fund it.
EDUCATION CENTER
Want to learn more about Traditional IRA accounts?
Essential Reading
Traditional IRA Guide
