1 Please note, however, that income-based restrictions are still in place regarding how much you can contribute to a Roth IRA. There is a single, 5-year holding period when determining whether earnings can be withdrawn as part of a qualified distribution free of federal (and, in most cases, state) income tax. This period begins January 1 of the year of the first contribution to any Roth IRA account.
2 You are treated as being age 50 or older if you will turn age 50 or older at any point during the calendar year.
3 Contributions to Traditional IRAs may be tax deductible. If you participate in an employer-sponsored retirement plan, the tax laws limit the deductibility of your contributions based on modified adjusted gross income (MAGI) ranges that are published annually and correspond to your federal tax filing status - if your MAGI is less than the lower limit, you are eligible for a full deduction for your contributions; if your MAGI is between the limits, you are eligible for a partial deduction; and if your MAGI is above the upper limit you are not eligible for a deduction. Anyone with earned income can make a contribution to an IRA, regardless of their age. Note that a spouse can also contribute on behalf of a spouse who has no earned income, provided the contributing spouse has enough earned income to cover the contributions. The Traditional IRA MAGI ranges are: $77,000 - $87,000 in 2024 and $73,000 - $83,000 in 2023 (single and head of household); and $123,000 - $143,000 in 2024 and $116,000 - $136,000 in 2023 (married filing jointly and qualified widow(er)).If you do not participate in an employer-sponsored retirement plan but your spouse does and your filing status is married filing jointly, the deductibility of your contributions is determined based on the MAGI range of $230,000 - $240,000 in 2024 and $218,000 - $228,000 in 2023.
Generally, if you are married filing separately, you are not entitled to a deduction for contributions to a Traditional IRA if your MAGI is $10,000 or more and you or your spouse participate in an employer-sponsored retirement plan. However, if you are married and file separately but do not live with your spouse at any time during the year, your maximum deduction is determined as if you were a single filer.
If neither you nor your spouse is covered by an employer retirement plan, the maximum deduction is either $7,000 or $8,000, depending on whether you are age 50 or older at any time during the year to which the contributions relate.
5 Asset allocation, rebalancing and diversification do not ensure a profit or protect against loss in declining markets.
Footnote
Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
A direct rollover occurs when you request that a rollover check be made payable directly to the new custodian for the benefit of your individual retirement account (IRA) or employer-sponsored retirement plan. A direct rollover is not subject to current tax or penalties.
An indirect rollover occurs when you request that a rollover check be made payable to you, after which you deposit the money into your IRA or another employer's retirement plan within 60 days. When such a distribution is made by the plan, the plan is required by law to withhold 20% of the taxable amount for prepayment of federal income taxes. If you wish to rollover the entire distribution, you must make up the 20% withholding out of your own funds, or you will be subject to income taxes and possibly early withdrawal penalties on the shortfall. If you fail to complete the rollover within 60 days, all or part of the money distributed to you will be taxable and a 10% additional tax for early withdrawals may apply.
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