Retirement plan contributions: An essential guide

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Answers to key questions about saving money in an IRA and managing your account.
Individual retirement accounts (IRAs) can allow for potential long-term growth, increase your tax efficiency and provide you with steady retirement income. But the rules surrounding these retirement accounts can be tricky. Debra Greenberg, director, Investment Solutions & Personal Retirement, Bank of America, fields the most common questions around contributing to and managing your IRAs.

Next steps

Footnote 1 You generally have until April 15th of the year following the tax year to make IRA contributions for that tax year. If April 15th falls on a weekend or a holiday, the deadline is typically the next business day.

Footnote 2 Generally, for a distribution from a Roth IRA to be federal (and possibly state) income tax-free, it must be qualified. A qualified distribution from your Roth IRA may be made after a five-year period has been satisfied (this period begins January 1 of the tax year of the first contribution or the year of conversion to any Roth IRA) and you (i) are age 59½ or older, (ii) are disabled, (iii) or qualify for a special purpose distribution such as the purchase of a first home (lifetime limit of $10,000). In situations where the original account owner is deceased, distributions to the beneficiary are also considered a qualified distribution If you receive a non-qualified distribution from your Roth IRA, the earnings portion of such distribution generally will be subject to ordinary income tax, plus a 10% early withdrawal additional tax if received before age 59½ unless an exception applies. A 10% early withdrawal additional tax may also be owed on converted Roth IRA principal withdrawn before the end of the five-year period. Although RMDs are not required for the original account owner, RMDs would apply to the inherited IRA account.

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.