A Traditional Individual Retirement Account (IRA) allows you to make investments that will grow tax-deferred until you remove money from your account.
You may want to consider this type of account if you:
- Are looking for a tax-deferred way to invest for retirement.
- Received taxable income during the tax year or if your spouse received taxable income and you are filing a joint return regardless of your age.
- Want to rollover an existing retirement plan to Janus Henderson.
Is a Traditional IRA right for you?
Your contributions to a Traditional IRA may be tax-deductible depending on your participation in a workplace retirement plan and certain income limitations.
Tax features and investments
What are the tax features?
One of the main benefits of a Traditional IRA is the ability to make deductible contributions. As long as you and your spouse are not covered by a workplace retirement plan, your contributions will be fully tax-deductible as long as certain income requirements are met. After investing, your account grows tax-deferred until you begin taking distributions from the account.
Potentially lower tax rate
Another tax benefit of a Traditional IRA may come into play when you remove the assets in retirement. IRA distributions are taxed at your ordinary income tax rate during the year the money is withdrawn. If your tax rate is lower at the time of withdrawal than it was when you originally contributed, you may realize considerable tax savings.
Any IRA contributions that were not tax-deductible should not be taxable when withdrawn from your account.
How much can I invest?
The IRS sets the contribution limits to Traditional IRAs and these limits can change each year. In addition, if you have reached age 50 on or before December 31 of the year in which the contribution is being made, you may be eligible to contribute an additional amount called a “catch-up” contribution. However, your IRA contribution can’t exceed your earned income for that tax year regardless of your age.
| Contributions | 2024 and 2025 | |
| Traditional IRA Limits | $7,000 |
Individuals age 50 and older:
A catch-up contribution of $1,000 in tax year 2024 and 2025 may be available.
Source: www.irs.gov
What happens if I invest too much?
Investments made to an IRA or retirement account that are above allowable limits are called excess contributions. This can also happen if you were ineligible to contribute in the first place. In either scenario, excess contributions may be subject to additional taxes or penalties.
There may be several methods to remedying an excess contribution, but it’s always best to consult a certified tax advisor to find which solution works best for your situation. Contact us to learn about your excess contribution options with Janus Henderson.
What are the investment minimums?
The minimum initial investment to open a Traditional IRA at Janus Henderson is $100 with an automatic investment of at least $50. If you don't establish an automatic investment, the minimum initial investment is $1,000. Subsequent one-time purchases must be at least $50.
Are there any investment deadlines?
Yes. You can contribute to a Traditional IRA for a specific tax year starting January 1 of that year and you must make all contributions for the tax year by the tax filing deadline, which is typically April 15 of the following year.
Generally, you cannot make contributions after that date even if you file for an income tax extension.
What are the fees for a Traditional IRA?
There is no cost to open an account and no annual maintenance fees when account minimum thresholds are met.
Withdrawals and helpful information
How do I request an account withdrawal?
Depending on the account options you have selected, you may redeem shares by telephone, online or in writing.
Generally, withdrawals from a Traditional IRA are taxable. There are no penalties on withdrawals after you turn age 59½. Withdrawing prior to age 59½ may result in a 10% early withdrawal penalty and is taxed as current income.
If you need to withdraw assets prior to age 59½, consult your tax advisor or refer to IRS Publication 590-B to understand if exceptions to the penalty apply.
Am I required to take money out of the account?
Yes, this is called a Required Minimum Distribution (RMD). If you turn age 73 by the end of the calendar year, you must take your first RMD by April 1st of the following year.
Failing to take your RMD could trigger a 25% (or 10% if corrected in a timely manner) excess accumulation penalty from the IRS on the amount of RMD not distributed. You can ask a Janus Henderson Representative to automate your RMD to help avoid missing the deadline.
What other information might be helpful to know?
If you and your spouse are covered by a workplace retirement plan, please refer to our Traditional IRA tax deductibility table to determine if you can deduct your contributions from your current income.
You can compare Traditional, Roth and SEP IRAs to find the best fit for you.
The Janus Henderson Universal IRA Disclosure Statement and Custodial Agreement provides complete details about IRA accounts at Janus Henderson.
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Today there are many uncertainties about what retirement will bring. Regardless of what stage of life you're in, we can help you evaluate your needs and find solutions. Call a Janus Henderson Retirement Specialist at 800.525.3713 or open an account today.