What is a traditional Individual Retirement Account (IRA)? How does traditional IRA tax work?
A traditional IRA allows any individual with earned income to invest pre-tax funds, although current law has specific restrictions on how much you can deduct based on your income and access to other tax-advantaged retirement accounts. Any gains you make will be tax-deferred, which means you will only pay taxes on those gains when you withdraw them. There may be substantial penalties for withdrawals prior to age 59½.
Traditional IRA rates depend on your investments; here at Liberty, we offer traditional IRA CDs, which give you the tax advantages of a traditional IRA along with the security and guaranteed returns of a CD.
What are the Roth Individual Retirement Account rules?
There are a few rules, guidelines, and advantages of a Roth retirement account:
- Roth IRA accounts are available to all individuals with earned income, regardless of age.
- Contributions are made with after-tax dollars, so they are not tax-deductible.
- You will pay no additional taxes when you withdraw funds as long as your account has been open for 5 years or more and you’re at least 59 ½, OR the withdrawal is the result of death or disability.
- There are no required distributions from a Roth IRA.
- Roth IRA rates depend on your investments; here at Liberty, we offer Roth IRA CDs, which give you the tax advantages of a Roth IRA along with the security and guaranteed returns of a CD.
Does Illinois tax Roth IRA conversions or distributions?
No, Illinois specifically excludes Roth IRA distributions from state taxable income and does not tax the conversion of a traditional IRA to a Roth IRA. Wondering how to start a Roth retirement account? Simply stop in a branch or contact us today to discuss your IRA options and open a Roth IRA!