An IRA is an "individual retirement arrangement." Assets grow tax free in an IRA. Distributions at retirement from a traditional IRA are generally taxable as ordinary income. Qualified distributions from a Roth IRA are tax free. In some cases contributions to traditional IRA accounts are deductible, however, contributions to Roth IRA accounts are always with after tax dollars and are never deductible.

For 2013 the maximum amount you can contribution to an IRA is $5,500 ($6,500 if you are age 50 or older) if you have taxable compensation and are under age 70 1/2. You can contribute beyond age 70 1/2 to a Roth IRA if you have taxable compensation. Contributions to Roth IRAs are limited or not allowed if your modified AGI is above certain amounts.

Upon turning age 70 1/2 you must begin taking required minimum distributions from traditional IRA accounts but you are not required to take distributions from Roth IRA accounts. A 10% penalty applies to distributions from both types of IRAs if you are under age 59 1/2 and do not meet the qualified withdrawal exceptions.

If you have any questions about IRAs please give us a call at (205) 443-2500.