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Although traditional IRAs and Roth IRAs have been around for decades, the rules involved have changed many times. The Secure 2.0 law, which was enacted at the end of 2022, brought even more changes that made IRAs more advantageous for many taxpayers. What hasn\u2019t changed is that they can help you save for retirement on a tax-favored basis. Here\u2019s an overview of the basic rules and some of the recent changes.<\/p>\n
Rules for traditional IRAs<\/strong><\/p>\n You can make an annual deductible<\/em> contribution to a traditional IRA if:<\/p>\n For example, in 2024, if you\u2019re a joint return filer covered by an employer plan, your deductible IRA contribution phases out over $123,000 to $143,000 of MAGI ($77,000 to $87,000 for singles).<\/p>\n Deductible IRA contributions reduce your current tax bill, and earnings are tax deferred. However, withdrawals are taxed in full (and subject to a 10% penalty if taken before age 59\u00bd, unless one of several exceptions apply). Under the SECURE 2.0 law, you must now begin making minimum withdrawals by April 1 of the year following the year you turn age 73 (the age was 72 before 2023 and 70\u00bd before 2020).<\/p>\n You can make an annual nondeductible<\/em> IRA contribution without regard to employer plan coverage and your MAGI. The earnings in a nondeductible IRA are tax-deferred but taxed when distributed (and subject to a 10% penalty if taken early, unless an exception applies).<\/p>\n Nondeductible contributions aren\u2019t taxed when withdrawn. If you\u2019ve made deductible and nondeductible IRA contributions, a portion of each distribution is treated as coming from nontaxable IRA contributions (and the rest is taxed).<\/p>\n Amount you can sock away<\/strong><\/p>\n The maximum annual IRA contribution (deductible or nondeductible, or a combination) is $7,000 for 2024 (up from $6,500 for 2023). If you are age 50 or over, you can make a $1,000 \u201ccatch-up contribution\u201d for 2024 (unchanged from 2023). Additionally, your contribution can\u2019t exceed the amount of your compensation includible in income for that year.<\/p>\n Rules for Roth IRAs<\/strong><\/p>\n You can make an annual contribution to a Roth IRA if your income doesn\u2019t exceed certain levels based on filing status. For example, in 2024, if you\u2019re a joint return filer, the maximum annual Roth IRA contribution phases out over $230,000 to $240,000 of MAGI ($146,000 to $161,000 for singles). Annual Roth contributions can be made up to the amount allowed as a contribution to a traditional IRA, reduced by the amount you contribute for the year to non-Roth IRAs, but not reduced by contributions to a SEP or SIMPLE plan.<\/p>\n Roth IRA contributions aren\u2019t deductible. However, earnings are tax-deferred and (unlike a traditional IRA) withdrawals are tax-free if paid out:<\/p>\n You don\u2019t have to take required minimum distributions from a Roth IRA. You can \u201croll over\u201d (or convert) a traditional IRA to a Roth IRA regardless of your income. The amount taken out of the traditional IRA and rolled into the Roth IRA is treated for tax purposes as a regular withdrawal (but not subject to the 10% early withdrawal penalty).<\/p>\n There\u2019s currently no age limit for making regular contributions to a traditional or Roth IRA, as long as you have compensation income. Contact us if you have questions about IRAs.<\/p>\n \u00a9 2024<\/em><\/p>\n <\/body> Although traditional IRAs and Roth IRAs have been around for decades, the rules involved have changed many times. The Secure 2.0 law, which was enacted at the end of 2022, brought even more changes that made IRAs more advantageous for many taxpayers. What hasn\u2019t changed is that they can help you save for retirement on […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[8,11,12],"class_list":["post-16828","post","type-post","status-publish","format-standard","hentry","category-individual-tax","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16828","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=16828"}],"version-history":[{"count":1,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16828\/revisions"}],"predecessor-version":[{"id":16829,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16828\/revisions\/16829"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=16828"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=16828"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=16828"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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