Individual Retirement Accounts (IRAs) are smart saving methods for retirement. Understanding how an IRA works is fairly simple, but there are a few restrictions you should consider before opening an account.
Keep reading for a basic overview of this popular retirement savings option and determine if opening one is right for you.
IRA Basics: What You Need to Know
IRAs are tax-advantaged savings accounts that allow you to save for retirement. There are two common types of IRAs:
Contributions to these accounts are subject to IRS limits that change annually. The main difference between these two types is when you receive the tax benefit, as explained below.
Synchrony Bank does not provide tax advice so be sure to contact your tax advisor or financial consultant before opening or contributing to an IRA.
Below is a summary of the types of contributions and distributions you can make with a Traditional IRA account.
Your contributions to a traditional IRA are generally made with pre-tax income. This allows you to deduct your contribution from your taxable income in the year when you make the contribution, subject to IRS limits and restrictions.
An account holder cannot make a contribution to a Traditional IRA after turning age 70 ½.
You can make withdrawals from a Traditional IRA without penalty at age 59 ½. Distributions before this age will result in a penalty, unless you qualify for an allowable exception, like purchasing your first home.
You are required to withdraw an annual minimum amount from your Traditional IRA once you turn 70 ½ or you could receive an IRS penalty of 50% of the amount not withdrawn.
Withdrawals will be taxed as part of your annual income in the tax year you withdraw the funds.
Below is a summary of the types of contributions and distributions you can make with a Roth IRA account.
Your contributions to a Roth IRA are taxed as part of your annual income in the year when you make the contribution.
You can allocate a Roth IRA contribution to last year until the tax filing deadline of the current year (typically April 15th), subject to IRS limits and restrictions.
You get the tax benefit of a Roth IRA when you withdraw from your account because you will generally pay no taxes on a qualified withdrawal or its earnings.
You may begin to withdraw money once you turn 59 ½. Premature distributions (before age 59 ½) are taxed as ordinary income and will carry an IRS penalty of 10% of the distribution amount unless an allowable exception, like purchasing a first home or paying for higher education, applies.
There is no mandatory age at which you must begin withdrawing from this account. Your money and your earnings can remain in this account indefinitely.
Open an IRA at Synchrony Bank
Getting an overview of IRAs is only the first step in building your retirement plan. If you are looking for deposit products to save for your retirement, see how Synchrony Bank’s IRAs can work for you.
Our IRAs feature award-winning customer service and FDIC insurance up to $250,000 per depositor for each ownership category. Be sure to consult your tax or financial advisor before contributing to an IRA.
Call us today at 844-345-5789 to learn more about your IRA options.
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*ANNUAL PERCENTAGE YIELD (APY): All APYs are accurate as of 05/22/2018.
APYs are subject to change at any time without notice. Offers apply to personal accounts only. Fees may reduce earnings. For Money Market and High Yield Savings Accounts, the rate may change after the account is opened. For CDs, a minimum of $2,000 is required to open a CD and must be deposited in a single transaction. A penalty may be imposed for early withdrawals. After maturity, if you choose to roll over your CD, you will earn the base rate of interest in effect at that time. The APY shown for CDs and IRA CDs is for a 60-month CD with a balance of at least $25,000. Click here for all CD rates and terms offered.
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NATIONAL AVERAGE: National Average APYs are based on specific product types of top 50 U.S. banks (ranked by total deposits) provided by Informa Research Services, Inc. as of 3/01/2017. CD Rates: Average APYs are based on certificate of deposit accounts of $25,000. High Yield Savings Rates: Average APYs are based on High Yield Savings Accounts of $10,000. Money Market Account Rates: Average APYs are based on Money Market Accounts of $10,000. Although the information provided by Informa Research Services, Inc. has been obtained from the various institutions, accuracy cannot be guaranteed. Please click on "Learn More" above for additional disclosures for each product.