IRA Rules and Regulations


One of the best options for retirement savings is to contribute to an Individual Retirement Account (IRA). An IRA allows you to save part of your income tax-free for retirement. However, before setting up your IRA, you need to know all the rules and regulations regarding the contributions you make and the deductions you receive.


  • Some rules and regulations regarding your IRA will depend upon the type of IRA you have. The most common IRAs are traditional and Roth IRAs. With a traditional IRA, there are no strict eligibility rules. To open a traditional IRA, you need to be older than 18, younger than 70 and receive any type of income. However, for a Roth IRA, you must meet all of the requirements for a traditional IRA and you must make less than a certain amount per year. That limit is $176,000 if you are married or $110,000 if you are single, as of 2010.


  • For a traditional IRA, your yearly contribution is limited to $5,000 per year if you are 49 years old or younger and $6,000 if you are 50 years old or older, as of 2010. If your total taxable income is less than this limit, you cannot contribute more than your taxable income. You can contribute to both IRA types, but you cannot exceed the limit mentioned above. Your deductible contributions are tax-free until you receive distributions from your IRA. Your non-deductible contributions are not tax-free, but you will not pay any taxes upon distribution. For a Roth IRA, you have the same rules for your contribution limit, according to your age and income. However, you cannot make deductible contributions into a Roth IRA.


  • With a traditional IRA, the rules for distribution depend upon your age. You can withdraw funds from your traditional IRA at any moment you desire, but if you are younger than 59, there is an extra 10 percent tax penalty upon withdrawal. After age 59, you can withdraw funds from your IRA at any time without penalties. However, the required minimum age to start receiving distributions from your IRA is 70 years old. With a Roth IRA, your distributions are not taxable if you are older than 59, if you are disabled or if the contributions are made to a beneficiary after your death. The required minimum distribution is the total of your balance divided by your life expectancy for each year that you receive distributions.

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