Traditional vs. Roth IRAs - Traditional IRAs

How does a Traditional IRA work?

The money you contribute to your Traditional IRA Plan may be deductible on your annual income taxes. The earnings made on your Traditional IRA Plan aren't taxed until the time you make a withdrawal. Withdrawals can be made without penalty once you reach the age of 59½. You must start taking Required Minimum Distributions (RMDs) from your Traditional IRA Plan when you reach the age of 70½.

This IRA is an excellent option for anyone eager to save for retirement and reduce their taxes at the same time.

What are the Traditional IRA contribution limits?

View the IRA contribution limits for the current year. This limit applies to all IRAs you have, whether it's at ING DIRECT or elsewhere.

If your earned income is less than the contribution limit, then you're only able to contribute up to the amount you earned for the year.

If you're 50 or older by the end of the year for which the contribution is made, you can add up to an additional $1,000 per year. This additional amount is referred to as a "catch-up contribution".

If you own multiple IRAs at ING DIRECT as well as other institutions, the total of all contributions to all IRAs may not exceed this annual contribution maximum.

If I already have a Roth IRA, can I have a Traditional IRA too?

Yes, you can have both a Roth IRA Plan and a Traditional IRA Plan. You can make contributions to both Plans as long you don't exceed the maximum contribution limit for each tax year.

Please consult with your tax advisor to see how much you can contribute.

Do I have to pay income taxes when I withdraw from my Traditional IRA?

Withdrawing money (taking a distribution) from a Traditional IRA is subject to tax. For more information, check the IRS Publication 590 or consult a tax professional.

If I make an early withdrawal from my Traditional IRA before age 59½, do I pay an IRS penalty?

In most cases, you will pay a penalty if you make an early withdrawal. Please consult your tax advisor for more information. If taken after age 59½, all earnings and principal distributions are penalty free.

Am I required to make withdrawals from my Traditional IRA at a certain age?

You're required to begin taking minimum withdrawals (Required Minimum Distributions) at age 70½ or you'll be penalized by the IRS. Please consult your tax advisor for information on Required Minimum Distributions.