Five Things to Know Before You Open an IRA

To keep retirement goals on track, consider opening an Individual Retirement Account (IRA).

Before you do, keep these five things in mind:

1. The Differences Between Traditional and Roth IRAs

With a traditional IRA, your pre-tax contributions may be deductible for the contribution year. When you withdraw funds in retirement, they’ll be taxed as income. If you’re eligible, you can fund a Roth IRA with after-tax contributions, but you can withdraw tax-free funds starting at age 59½.

2. Your Income and Other Retirement Plans Affect Tax Deductions on Traditional IRA Contributions

If you meet the income qualifications and are not covered by an employer-sponsored retirement plan, you may be eligible for tax deductions on your IRA contribution

3. Roth IRAs have Income-Based Contribution Restrictions

  • For 2016, single taxpayers who earn less than $117,000 and jointly filing married couples who earn less than $184,000 can contribute up to the total IRA limit.
  • The Roth IRA limit for single filers who earn $117,000 to $131,999 and jointly filing married couples earning $184,000 to $193,999 will be reduced from the total IRA limit.
  • Single taxpayers earning $132,000 or more and taxpayers filing jointly who earned $194,000 or more can’t contribute to a Roth IRA at all.

4. There is a Limit to Your Annual Contributions

For the 2016 tax year, if you’re younger than 50, you can open an IRA and contribute up to $5,500 annually. If you’re 50 or older, you can contribute up to $6,500 annually. You can even contribute until tax day for last-minute tax savings.

5. Your Income Tax Bracket May Help Determine Which Type of IRA You Choose

If your salary puts you in a high income tax bracket, you might consider contributing to a traditional IRA to defer tax payments until your retirement when you could be in a lower bracket, says Andrew George, a Financial Advisor with Regions Investment Solutions. If you’re in a low income tax bracket, you might want to contribute to a Roth IRA to pay a lower tax rate now, so you can benefit from tax-free withdrawals in retirement after you’ve built a comfortable nest egg.

If you’re ready to open an IRA, learn more about Regions’ IRA solutions.

Andrew George is a Financial Advisor with Regions Investment Solutions. Regions Investment Solutions is a marketing name of Cetera Investment Services. Securities and insurance products are offered through, and Financial Advisors are registered with, Cetera Investment Services LLC, member FINRA/SIPC. Advisory services are offered through Cetera Investment Adviser LLC. Neither Cetera investment Services nor Cetera Investment Advisers is an affiliate of Regions Bank or its related companies.

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This communication is provided for educational and general marketing purposes only and should not be construed as a recommendation or suggestion as to the advisability of acquiring, holding or disposing of a particular investment, nor should it be construed as a suggestion or indication that the particular investment or investment course of action described herein is appropriate for any specific retirement investor. In providing this communication, Regions is not undertaking to provide impartial investment advice or to give advice in a fiduciary capacity.

This information should not be relied on or interpreted as accounting, financial planning, legal or tax advice. Regions encourages you to consult a professional concerning your specific situation and visit for current tax rules.

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