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Individual Retirement Accounts
IRA Custodians Texas

An IRA is used as a retirement plan established by an individual that provides various tax advantages when saving for retirement. There are various types of IRAs, each created under specific rules and regulations to accomplish certain objectives.  For example: Traditional IRAs, Roth IRAs, Rollover IRAs, Spousal IRAs and Inherited IRAs.   An IRA can be held by a financial institutional in a custodial relationship only or in a fully managed trustee relationship.  There are many investment alternatives for IRAs, not just CDs or annuities. 

What is an IRA?

The concept of the Individual Retirement Account (“IRA”) was first introduced in 1971 by President Nixon’s Administration and became part of our tax laws in 1974. Since its introduction Congress has made numerous changes to the tax laws governing IRAs (which we will call “Traditional IRAs”).  Almost a quarter century after the introduction of IRAs, in 1997, Senator William Roth introduced a new type of IRA, called the “Roth IRA”.  Because of certain limitations imposed on the Roth IRA, high-income earners could not create Roth IRAs.  However, as a result of recent legislation, those limitations were eliminated in 2010 and thereafter so that the IRAs will likely become more prevalent in the future for affluent clients.

The Roth IRA, like the Traditional IRA, has a plethora of specific tax rules that apply. 

What is a "Roth" IRA?
A Roth IRA is an IRA; however, it is different from a Traditional IRA in the following general ways:
  • Contributions to a Roth IRA are non-deductible for income tax purposes, whereas, subject to certain limitations, contributions to a Traditional IRA are deductible. 
  • Withdrawals from a Roth IRA generally are income tax-free (i.e., because the Roth IRA assets were taxed upon contribution or conversion), whereas withdrawals from a Traditional IRA are treated as ordinary income and taxed as such. 
  • There are generally fewer restrictions on withdrawals from Roth IRAs vis-à-vis Traditional IRAs.
  • There are no mandatory distributions for the owner of a Roth IRA, whereas at 70 ½ the owner of a Traditional IRA is required to begin taking mandatory distributions.

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