Understanding IRAs in 2020 – Your IRA Resource Center
According to Investopedia, an individual retirement account (IRA) is a tax-advantaged investing tool that individuals use to earmark funds for retirement savings.
As of 2020, there are several types of IRAs: traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs. Depending on your employment status, IRAs can be of various types and have different tax liabilities. Withdrawing from an IRA before the age of 59 1/2 is usually subject to a 10 percent early-withdrawal penalty.
The rules for contributing and withdrawing from IRAs change every year. On top of all of the everyday life things you need to take care of, memorizing and keeping abreast of IRA laws is probably not your top priority.
We’re here to help.
We’ve compiled a list of IRA resources to give you a better understanding of basic terms and the different IRA options you have.
IRA and Retirement Plan Limits for 2020
The maximum amount you can contribute to a traditional IRA or a Roth IRA in 2020 is $6,000 (or 100% of your earned income, if less), unchanged from 2019. The maximum catch-up contribution for those age 50 or older remains at $1,000. You can contribute to both a traditional IRA and a Roth IRA in 2020, but your total contributions can’t exceed these annual limits.
Traditional IRAs and Roth IRAs
A traditional IRA is a personal savings plan that offers tax benefits to encourage retirement savings. The Roth IRA has the same contribution limits that apply to traditional IRAs; however, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits.
Traditional Vs. Roth IRAs (Table)
See a side-by-side comparison of these two IRA options, including age restrictions, contribution limits, taxes and more.
Withdrawing from IRAs
If you own a traditional IRA or Roth IRA, you may be able to withdraw funds from these accounts to pay your child’s college expenses. But the effect of taxes and penalties should be considered.
The SECURE Act and Your Retirement Savings
The Setting Every Community Up for Retirement Enhancement (SECURE) Act was enacted in December 2019 as part of a larger federal spending package. This long-awaited legislation expands savings opportunities for workers and includes new requirements and incentives for employers that provide retirement benefits. At the same time, it restricts a popular estate planning strategy for individuals with significant assets in IRAs and employer-sponsored retirement plans.
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For over 11 years David has concentrated on developing, implementing, and monitoring personalized financial plans for his clients. He specializes in retirement strategies and IRA rollover options for 401(k)’s, 403(b)’s, 457’s, Profit Sharing and TSP’s.
Whether it’s developing sound solutions for your retirement, generating income, or protecting your assets through insurance, David is here to:
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*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.