Retirement Accounts

There are several individual retirement account (IRA) options available at Scottrade. Each one has slightly different benefits and tax advantages, so it's helpful to understand each one before deciding whether an IRA fits your investment plan.

The federal government has placed some investment restrictions on IRA accounts. Eligible investments include stocks, bonds, unit trusts, mutual funds and government securities. Some options trades such as selling covered calls and purchasing calls may be permitted in some types of accounts. For more information, please contact your local Scottrade team.

Traditional IRA

Traditional Individual Retirement Accounts (IRAs) are available to investors between 18 and 70½ years of age. Earnings compound tax-deferred until they are withdrawn at age 59½ or later. Individuals who are covered by a 401(k) or other employer-sponsored retirement plan are also eligible to contribute to an IRA.

Contributions are tax-deductible, and individuals may contribute up to $5,500 or 100% of their compensation, whichever is less. Those over age 50 may contribute an additional $1,000 of compensation each year.

Roth IRA

Roth Individual Retirement Accounts (IRAs) are available for investors age 18 and over who fall within Roth IRA income limits.

Contributions are not tax-deductible, but because contributions are made after tax, funds can be withdrawn tax- and penalty-free at age 59 ½ provided the account has been open at least five year. Individuals may contribute up to $5,500 or 100% of compensation, whichever is less, and those over 50 may contribute an additional $1,000 of compensation.

Rollover IRA

IRA rollovers allow you to move assets from a 401(k), 403(b), 457, or other qualified employer-sponsored retirement plan without tax or penalty. A rollover typically occurs as a result of a job change or retirement. Rollover IRAs offer tax-deferred growth potential until distributions are taken from the account. If distributions are taken prior to age 59 ½, taxes and an IRS penalty may apply. Mandatory distributions are required at age 70 ½. Rollovers made from an employer-sponsored plan to an IRA provide a greater amount of investment choices than are typically offered in an employer plan.

SIMPLE IRAs

SIMPLEs, or Savings Incentive Match Plans for Employees, are retirement plans that small business owners can open for their employees. The plan is available to any small business owner with less than 100 employees. Many plans do not have a designated financial institution, so employees may hold their SIMPLE individual retirement account (IRA) at the brokerage of their choice.

Contributions to SIMPLE IRAs are made by the employee via salary deferral and cannot exceed $12,500 in 2015. Additional contributions, known as 'catch-up contributions,' of no more than $3,000 a year are permitted for employees age 50 and over. The employer is generally required to match each employee's salary reduction contributions on a dollar-for-dollar basis up to 3% of the employee's compensation.

SIMPLE IRA savings may be withdrawn at any time, but additional penalties will apply if you take a distribution before age 59 1/2. When money is withdrawn, it will be taxed as income (similar to a traditional IRA). Also like traditional IRAs, SIMPLE IRAs are subject to minimum required distributions after age 70 1/2.

Salary reduction contributions can be excluded from your gross income for tax purposes, but they are still subject to Social Security, Medicare and federal unemployment taxes.

SEP IRA

A Simplified Employee Pension (SEP) IRA is a retirement account for small business owners or individuals who are self-employed. Small business owners may also provide a SEP plan for employees, which may include employer contributions to employees' SEP IRA accounts. SEP IRAs offer tax-deferred growth potential with no minimums.

The maximum contribution per employee is 25% of compensation up to $53,000. Plan administration is not complicated, and employers may increase, decrease or skip annual contributions as necessary.

The material provided is for informational purposes only, and Scottrade is not responsible for any errors or omissions. Contribution and income limits are subject to change without notice. Please consult your tax or legal advisor(s) for questions concerning your personal tax or financial situation. The value of investments may fluctuate and securities, when sold, may be worth more or less than their original cost.