To start off, let’s talk about the basics of IRAs. The following information holds true for both traditional IRA (TIRA) and Roth IRA (RIRA) plans.
IRA accounts can be held at a variety of institutions, from banks and credit unions, to brokerages and insurance companies. Essentially, if it is a financial institution, quite likely there is an IRA offering. Typically, an account is established by filling out an application, identifying yourself by name, address, and social security number. You’ll be asked to name a beneficiary – a decision not to be taken lightly, but we’ll get to that issue a bit later. Having filled out the necessary paperwork, generally you will send off the application, along with your contribution to the account.
In any given year, there is a limit to the amount you are allowed to contribute to ALL IRAs. This means the total of all of your contributions, whether to a TIRA or a RIRA, cannot exceed the annual limit. If you are age 50 or older, there is an additional “catch-up” contribution allowed.
It is important to understand that the term “Individual” in Individual Retirement Arrangement is taken quite literally: IRAs are Individual instruments, not jointly held, so the limits mentioned above are per individual, not per household