IRA Solution Center
Investing in a traditional IRA can be an important step towards planning for a comfortable retirement. Some people find investing in a traditional IRA beneficial because of its tax advantages. This type of IRA grows tax-deferred and is taxed as ordinary income upon withdrawal. The tax deferral allows your earnings to potentially compound to a larger amount than if they were taxed annually.
Another benefit of investing in a traditional IRA is some or all of your contributions can be tax deductible. Your ability to deduct your contributions is determined by both your income level and participation in an employer sponsored retirement plan. This tax deduction could help lessen your immediate tax liability. *
How can I fund a traditional IRA?
A traditional IRA can be funded with annual contributions (subject to limits) or a rollover from:
- Another traditional IRA
- An employer's qualified retirement plan
- A deferred compensation plan of a state or local government (section 457 plan)
- A tax-sheltered annuity (section 403(b) plan)
How much can I contribute to a traditional IRA?
An individual (or spouse) may contribute up to the lesser of the allowable annual contribution or their total earned income. See below for the annual contribution limits.
| 2023 | 2024 | |
| IRA Contribution (under age 50) | $6,500 | $7,000 |
| IRA Contribution (age 50 or over) | $7,500 | $8,000 |
| Phaseout for deducting IRA contribution based on Modified Adjusted Gross Income (qualified plan participant) | ||
| Married filing jointly | $116,000-$136,000 | $123,000-$143,000 |
| Married filing separately | $0 - $10,000 | $0 - $10,000 |
| All Others | $73,000-$83,000 | $77,000 - $87,000 |
| Nonparticipant married to a participant | $218,000-$228,000 | $230,000-$240,000 |
| Neither spouse a participant | Fully Deductible | Fully Deductible |
* Neither Voya Financial Advisors, its affiliated companies or representatives offer legal or tax advice. Consult with your tax and legal advisors regarding your individual situation.
When can I withdraw assets from a traditional IRA?
Once you reach age 59 1/2, withdrawals can be taken without penalty. Distributions prior to age 59 1/2 are called early distributions. Unless an IRS-approved exception applies, early distributions will be subject to a 10% penalty.
You must take your Required Minimum Distribution (RMD) for each year starting with the year you reach age 73. If you do not receive that minimum amount in your 73 year, then you must receive distributions for your 73 year by April of the the next year.
Traditional IRA at a Glance:
- Tax-deductible contributions within income eligibility limits
- Tax-deferred growth of earnings
- RMD withdrawals required at appropriate age
- Designated beneficiaries can stretch distributions over life expectancy
Several key benefits may make the Roth IRA a good retirement savings vehicle. One benefit is that Roth IRA contributions are made on an after-tax basis, meaning qualified distributions are generally taken on a tax-free basis. Another advantage of the Roth IRA is that you're not required to take withdrawals at any point, and when you do make withdrawals, the money withdrawn may be tax free.
If you have earned income and are below the Adjusted Gross Income eligibility limits, you can contribute to a Roth IRA.
How can I fund a Roth IRA?
A Roth IRA can be funded with annual contributions (subject to limits), a rollover from another Roth IRA, or a Roth conversion from:
- A traditional IRA
- An employer's qualified retirement plan
- A deferred compensation plan of a state or local government (section 457 plan)
- A tax-sheltered annuity (section 403(b) plan)
Please note that these conversions are taxable events.
How much can I contribute to a Roth IRA?
An individual (or spouse) may contribute up to the lesser of the allowable annual contribution or their total earned income. See below for the annual contribution limits.
| 2023 | 2024 | |
| Roth IRA Contribution (under age 50) | $6,500 | $7,000 |
| Roth IRA Contribution (age 50 or over) | $7,500 | $8,000 |
| Phaseout of Roth IRA contribution eligibility (based on Modified Adjusted Gross Income): | ||
| Married filing jointly | $218,000-$228,000 | $230,000-$240,000 |
| Single or Head of Household | $138,000-$153,000 | $146,000-$161,000 |
| Married filing separately | $0 - $10,000 | $0 - $10,000 |
When can I withdraw assets from a Roth IRA?
Withdrawals from a Roth IRA can be made at any time. When you withdraw money from a Roth IRA, the distribution will either be considered qualified or not qualified. If you receive a distribution that is not a qualified distribution, part of it may be taxable.
Generally, if it has been at least 5 years from the beginning of the year in which you first set up and contributed to a Roth IRA, and you are at least age 59 1/2 at the time of the distribution, then it is a qualified distribution. Other qualified distributions including buying or rebuilding a first home, death, or disability.
Roth IRA at a Glance:
- Qualified distributions are tax-free
- Potential tax-free withdrawals
- Contributions may be withdrawn at any time
- Designated beneficiaries can distribute over life expectancy
For both Traditional IRAs and Roth IRAs, when considering a rollover from an employer plan, carefully consider the provisions of your current retirement plan and the new product for differences in cost, benefits, surrender charges or other important features before transferring assets. Clients are advised to consult their own legal and tax advisors regarding their situation.
Taking into account your personal situation, you may want to consider your options, such as: keeping your assets where they are; withdrawing your assets (taxes are generally due upon withdrawal and any applicable tax penalties that may apply): or your may choose to rollover your assets to an employer-sponsored retirement plan that accepts rollovers, or to another eligible vehicle.
Should I invest in a traditional IRA or Roth IRA?
This question is one that must be answered on an individual basis. Some people may find themselves favoring a traditional IRA, while others would benefit more from the Roth IRA.
In addition to consulting the chart below, consider the following:
If you answer yes to the majority of these questions, a Roth IRA may be an appropriate retirement savings vehicle.
Am I below the income limits to make a Roth contribution?
Am I above the income limits to deduct a traditional IRA contribution?
Would I rather have tax-free growth instead of an immediate tax deduction?
Will my tax rate be higher in retirement than it is now?
Will I need to access my contributions prior to 59 1/2?
You can also visit the Voya online tool: IRA: Roth vs Traditional Calculator
| Traditional IRA | Roth IRA | |
|---|---|---|
| Tax-deductible contributions | X | |
| Tax-deferred growth of earnings | X | X |
| Potential tax-free withdrawals | X | |
| Contributions may be withdrawn at any time | X | |
| RMD's required at appropriate age | X | |
| Designated beneficiaries can distribute over life expectancy | X | X |
Please be sure to consult your tax advisor as there may be other influencing factors not covered here.
We have many different IRA products that we work with, depending on your particular needs. This includes direct mutual fund IRAs with companies like American Funds® and Franklin Templeton Investments, as well as the mutual fund custodial platform from Voya called Select Advantage IRA that offers over 100 mutual funds from over 30 money managers. We can also can provide Advisory managed accounts for more active management.
You can take a look at more details about Voya Select Advantage at this website.
Please contact us to let us help determine what is best for you.