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An Individual Retirement Account (IRA) provides eligible investors a tax-advantaged way to save for retirement. Whether you are looking to better understand the basics of IRAs, compare IRAs side by side, try a calculator or find out how to open an IRA, we are here to help.
A basic understanding of IRAs, such as the different types, eligibility rules, contribution limits and withdrawal guidelines, will help you make informed decisions before investing.
IRA stands for Individual Retirement Account, and provides investors meeting eligibility requirements a tax-advantaged way to invest for retirement. The IRA itself is not an investment, but it holds the investments you choose to save toward your retirement goal. IRAs can hold mutual funds or individual securities.
The most common types of IRAs are accounts that you open on your own, as opposed to a workplace retirement plan where your employer opens and maintains the account for you. In many cases when changing jobs or retiring, you can roll over a retirement account from a previous employer's plan into a Rollover IRA.
Each type of IRA has specific benefits and guidelines. Find out more about the specific details of each type below.
Choose from a variety of American Century Investments® no-load mutual funds to create a balanced retirement portfolio.
Choose from many investment vehicles and mutual funds from other fund families for your IRA.
The IRS sets eligibility requirements and contribution limits each year for IRAs.
* Modified Adjusted Gross Income (MAGI) is your Adjusted Gross Income (AGI) with standard deductions included.
Annual contribution limits are listed below. You can contribute an additional amount to your IRA each year if you are age 50 and older. These are called catch-up contributions. If you are married and your spouse is not working, you may also make a spousal contribution in to an IRA under your spouse's Social Security number.
The Pension Protection Act of 2006 makes permanent higher contribution limits for IRAs and employer-sponsored retirement plans. The limits have been in effect since 2001.
If you are at least 50 years old before the end of the year, you may be allowed to make additional "Catch-Up" contributions as you approach retirement
Please refer to IRS Publication 560 and 590 for more information about IRA contribution deadlines and limits.
You can begin taking penalty-free withdrawals from a Traditional IRA at age 59½, however taxes will apply to these withdrawals. For Roth IRAs, you must be 59½ and have held the account for at least five years for the withdrawals to be tax free and penalty free. If you take a withdrawal before age 59½ for either type of IRA, you could face a 10% penalty.
The IRS requires you to take money from a Traditional IRA when you reach a certain age. These withdrawals are called required minimum distributions (RMDs).
The SECURE Act, effective January 1, 2020, changed the age at which RMDs begin.
Roth IRAs are not subject to this requirement. The rule also applies to Rollover, SEP, SIMPLE and SARSEP IRAs, but not to Roth IRAs. You do not have to take a distribution from a Roth at any age.
Learn more about these withdrawals for Traditional IRAs by reviewing our RMD Guide.
We can help you open your IRA.
IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.
This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.
This information is for educational purposes only and is not intended as a personalized recommendation or fiduciary advice. There are different options available for your retirement plan investments. You should consider all options before making a decision. Our representatives can help you evaluate all of your distribution options.