Individual retirement accounts

Contributions — As long as you've earned income, you may contribute to an IRA. You may also contribute for a nonwage-earning spouse. For 2022, you can contribute up to $6,000, for 2023 the annual contribution limit has increased to $6,500. If you are age 50 or over by the end of the year, you can contribute an additional $1,000.

Tax Benefits — You may be able to fully deduct your contributions on your tax returns (limits may apply if you or your spouse participates in an employer-sponsored plan). Any earnings are tax-deferred, and you pay the taxes at the time of withdrawal.

Distributions — Though all withdrawals will be subject to ordinary income tax, you may withdraw money at any time. However, if you withdraw money before you reach age 59½, you may also incur an IRS 10% early distribution penalty unless an exception applies².

Some exceptions include:

• First home purchase ($10,000 lifetime limit).
• Higher education expenses.
• Series of payments based on life expectancy (Substantially Equal Periodic Payments).
• Eligible unreimbursed medical costs.
• Total and permanent disability.
• Payment of account assets upon your death.
• Medical insurance premiums while unemployed.
• IRS levy.
• Birth or adoption of a child

Required Minimum Distributions —The SECURE Act 2.0 increases the age to begin taking Required Minimum Distributions (RMDs) to 75 in an incremental phased-in approach over the next 10 years.

• For an individual who attains age 72 after December 31, 2022, and age 73 before January 1, 2033, the age for starting RMD is age 73.
• For an individual who attains age 74 after December 31, 2032, the applicable age is 75.

The Internal Revenue Service (IRS) can impose a 25% penalty on any RMD the IRA holder does not take from his/her IRA.

Contributions — Anyone who meets the guidelines for modified adjusted gross income may contribute to a Roth at any age. For 2023 you can contribute up to $6,500, which increased from the 2022 annual contribution limit of $6,000.

In order to invest in a Roth IRA you must meet certain income guidelines. In 2023, your adjusted gross income (AGI) must be:

• If you are single - Less than $138,000 for the full contribution; $138,000 to $152,999.99 for a reduced amount. These limits increased from $129,000 and $143,999.99 for 2022.
• If you are married and file jointly - Less than $218,000 for the full contribution; $218,000 to $227,999.99 for a reduced amount. These limits increased from $204,000 and $213,999.99 for 2022.
• You can make contributions even after age 73 if you have earned income and meet the income guidelines.

Tax Benefits — Any earnings are tax-deferred and distributions may be tax-free, assuming they meet the criteria below.

Distributions — Distributions of your contributions are always tax-free and can occur at any time. Distributions of earnings would not be tax-free until your Roth IRA is at least five years old and you meet one of the following qualifying² reasons:

• Attainment of age 59½.
• First home purchase ($10,000 lifetime limit).
• Death or disability.