Account Types: IRA Account (Part 3 of a 5 Part Series)
/In this week’s Adulting 101, I will be covering another type of retirement savings account, an IRA.
Similar to other types of retirement accounts, there are limits to how much you can contribute to an IRA each year ($6,000 for 2022; +$1,000 catch up contribution for age 50+). There are no income limitations to qualify for making a direct contribution to an IRA. However, there are income limitations that determine whether you’re eligible to deduct the contribution from your taxable income.
Investments in these types of accounts grow tax deferred. Later in life, every dollar you pull out of the account will be taxed. Currently, the age at which you can first make a qualified withdrawal from this account is 59½. A qualified withdrawal means you do not pay any penalties on top of the taxes due. IRA accounts are subject to annual Required Minimum Distributions, which begin the year you turn age 72, just like a 401k.
