First of all, the only difference between a Traditional or a Rollover IRA is how the account was created. A Traditional IRA is created through contributions made directly to an IRA outside of employer-sponsored plans. A Rollover IRA is created through the transfer or rollover of a previous employer retirement plan (i.e., 401(k), 403(b).
How Can A Traditional Or Rollover IRA Help With Your Retirement Goals?
BENEFITS OF A TRADITIONAL OR ROLLOVER IRA.
Growth potential
The most powerful investment strategy is taking advantage of tax-deferred compounded growth, and an IRA is an excellent tool to help plan for financial goals.
No Income limitations to open an IRA.
However, there are limitations for the deduction of contributions.
Consolidation
The ability to consolidate various retirement accounts is possible with an IRA:
If you have multiple employer plans and find it difficult to keep up with and manage the various accounts, it may be possible to consolidate your retirement accounts into one IRA.
A consolidation of multiple accounts will facilitate the process of identifying the level of total risk associated with the overall portfolio. An overall picture of your total investment portfolio will allow an opportunity to have expert advice in the various financial planning areas - investments, taxes, Social Security/Medicare, retirement distributions, and estate planning.
COMMON QUESTIONS - Traditional IRAs
If I’m contributing to a 401(k) plan, can I contribute to an IRA?
You can contribute the full IRA limit in the same year you contribute to a 401(k), but the income limit on your Modified Adjusted Gross Income (MAGI) may impact whether you can deduct Traditional IRA contributions. For 2025, the IRA limit is $7,000 for those under 50 and $8,000 for those 50 and older. Having a 401(k) doesn't reduce your ability to contribute to an IRA, but it may affect the tax deductibility of Traditional IRA contributions.
Can I borrow from my IRA?
No, you cannot borrow from an Individual Retirement Arrangement (IRA); taking a loan from an IRA is considered a prohibited transaction by the IRS and is not permitted. Instead of a loan, you can make a withdrawal, but this may incur taxes and a 10% early withdrawal penalty if you are under age 59½, unless an exception applies.
What is a Non-Deductible IRA?
A nondeductible IRA is a traditional IRA that allows you to contribute money but provides no immediate tax deduction for your contribution, typically because your income is too high to qualify for the deduction. The money you contribute grows tax-deferred, and the contributions themselves are not taxed until withdrawal, but the principal you contributed is withdrawn tax-free in retirement because you've already paid taxes on it. Nondeductible IRA contributions are reported using IRS Form 8606.
Can an IRA be set up for children?
Yes, you can set up a custodial IRA for a minor child, but it is only possible if they have earned income. You can contribute funds on their behalf, but the total annual contribution cannot exceed the child's earned income for the year or the annual maximum, whichever is lower.
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