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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 Opens a new window for the current year. This limit applies to all IRAs you have, whether it's at Capital One 360 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 Capital One 360 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.

What's the difference between Traditional and Roth?

When deciding between a Traditional and Roth IRA, you may want to ask yourself: Do I want to save on taxes now with a Traditional IRA or when I retire with a Roth IRA?

Here are some key differences between a Traditional and Roth IRA Plan:

Traditional vs. Roth IRAs
Retirement Plan CriteriaTraditionalRoth
Eligibility Everyone can contribute (consult your tax advisor for additional information) Ability to contribute is determined by annual income
Tax Deductibility of Contributions Contributions may be tax deductible (amount is subtracted from gross income to reduce the amount of income subject to tax) Contributions are not tax deductible – you will have to pay income taxes on your contributions.
Earnings Earnings are tax-deferred if taken as normal distributions after age 59½ Earnings are tax-exempt if taken as normal distributions after age 59½
Distributions All earnings and principal distributions are taxed at the time of withdrawal Withdrawals prior to age 59½ are generally not permitted without penalty All earnings and principal distributions are tax free if taken after age 59½ You can withdraw your contributions (but not the earnings) after a waiting period without penalty
Mandatory Distributions Must start at age 70½ No mandatory distributions
Age Limitations for Contributions No contributions after age 70½ No age limit

As always, consult your tax advisor for additional information.

Traditional vs. Roth IRAs

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