Individual Retirement Accounts (IRAs)

Qualifications

Must have earned income. There are no age restrictions.

Must have earned income. There are no age restrictions.

Maximum Contributions

Taxable years beginning in 2021 and after — $6,000*

Taxable years beginning in 2021 and after — $6,000*

Catch-Up (50+)

2021 and after $1,000*

2021 and after $1,000*

Tax Status of Earnings

Tax-deferred until withdrawal

Not taxed. Earnings grow tax-free

Contribution Restrictions (based on adjusted gross income)

Yes, if active participant in employer retirement plan. Contribution phase-outs for 2020 tax years. 
Singles: $66,000 - $76,000;
Married joint: $105,000 - $125,000

Contribution phase-outs for 2020 tax year.
Singles - $125,000-$140,000;
Married joint - $198,000-$208,000

Tax Deduction

Yes. Contributions up to the limit are fully tax deductible if you are not an active participant in a retirement plan. Otherwise phase-out rules apply

No. These are after-tax dollars.

Penalties for Early Withdrawal

None if:

• Over 59 1/2
• Death or disability
• Qualified medical expense
• Certain health insurance
• Qualified higher education expenses
• Qualified 1st time home purchase (up to $10,000)
• Due to IRS levy
• Qualified disaster-related expenses
• Expenses from birth or adoption of a child (up to $5,000)
• Substantially equal periodic payments over life expectancy (annuity payments)
• Until December 31, 2020, Coronavirus-related distributions up to $100,000 (as allowed in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act)).

None if made after a 5-year period and:

• Over 59 1/2
• Death or disability
• Qualified medical expense
• Certain health insurance
• Qualified medical expense
• Qualified 1st time home purchase (up to $10,000)
• Due to IRS levy
• Qualified disaster-related expenses
• Expenses from birth or adoption of a child (up to $5,000)
• Substantially equal periodic payments over life expectancy (annuity payments)
• Until December 31, 2020, Coronavirus-related distributions up to $100,000 (as allowed in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act)).

Required Distributions

Generally, must begin by April following year participants turns 72 (as of January 1, 2020).

Only after death of participant