TRADITIONAL IRA FAQ

• How is a Traditional IRA different from a Roth IRA?

  Traditional and Roth IRAs feature both similarities and differences: 

  • Both accounts let you contribute up to $6,500  a year (or $7,500  if you're over 50), and contributions must be from earned income, so you need to be employed.
  • You can deduct contributions to a Traditional IRA, whereas contributions to a Roth IRA are not deductible.
  • You pay ordinary income tax on withdrawals from a Traditional IRA, whereas qualified withdrawals from a Roth IRA are generally tax-free.
  • You need to wait until you're 59½ to withdraw funds from a Traditional IRA (unless you meet exception criteria), whereas a Roth IRA lets you withdraw contributed  funds at any time, and any earnings without penalty if you’re 59 ½ and it’s been five years since you opened the account.
  • A Traditional IRA has required minimum distributions (RMDs) starting at age 73, whereas a Roth IRA has no RMDs.

  Depending on your modified adjusted gross income and filing status, you may be able to open either type of account even if you have a 401(k) or another type of employer-sponsored retirement plan or are covered by a retirement plan at work. Contributions to a traditional IRA may not be tax deductible if also contributing to an employer-sponsored retirement plan.

• What are the exception criteria for early withdrawal from a Traditional IRA?

  In many cases, you need to pay a 10% early penalty tax if you withdraw funds from a Traditional IRA before age 59½. However, there are exceptions when you may access the funds without paying the tax:

  • A down payment toward your first home up to $10,000
  • Qualified higher education expenses
  • Unreimbursed, out-of-pocket medical expenses
  • Health insurance premiums if you're unemployed
  • A permanent disability
  • Unpaid federal taxes
  • Called to active duty
  • Inherit the IRA

• Are there any age restrictions on an IRA account?

  There are a few key age guidelines to be aware of:

  • You can contribute to an IRA at any age as long as you are employed with earned income.
  • You can contribute up to $6,500 a year if you're under 50 in 2023.
  • You can contribute up to $7,500 a year if you're over 50 in 2023.

   

• Do I need to join Wasatch Peaks Credit Union to open this account?

  Yes, you need to join the credit union, and becoming a member is easy! You simply need to meet these criteria:

  • You are an immediate family member of an existing member-owner, such as a parent, child, brother, sister, spouse, or surviving spouse.
  • You live, work, worship, or attend school in Weber, Morgan, or Davis Counties in Utah.