Fund your future now with an IRA

You need to make your Traditional and Roth IRA contributions by the individual tax-filing deadline.

Total annual contributions to a Traditional IRA, Roth IRA, or both cannot be more than the annual maximum for your age or 100% of earned income, whichever is less.

2023 tax year maximum annual contribution:

• $6,500 if you’re younger than 50
• $7,500 if you’re 50 or older within a particular tax year

2024 tax year maximum annual contribution:

• $7,000 if you’re younger than 50
• $8,000 if you’re 50 or older within a particular tax year

Open the Traditional IRA section (below) for information on the deductibility of your contribution and the Roth IRA section (below) for information on contribution limits.

It is generally a good idea to maximize your IRA contribution to potentially gain the full benefit of tax-advantaged savings and increase your retirement assets.

At Wells Fargo Advisors, you can make contributions to your IRA online or using your mobile device¹. A contribution received between January 1 and the tax-filing deadline must indicate whether it is for the current year or prior tax year. If no year is indicated, it is considered a current-year contribution.

If your employer offers a SIMPLE IRA or SEP IRA retirement plan and you want to take advantage of it, you need to open a SIMPLE IRA or SEP IRA to hold your plan assets.²

A SIMPLE IRA plan lets eligible employees make salary deferral contributions to their SIMPLE IRA on a pre-tax basis. In addition, the employer must make either matching or non-elective contributions.

A SEP plan lets an employer make deductible contributions for eligible employees to SEP IRAs that plan participants have established.

Traditional, SEP, and SIMPLE IRA owners begin taking RMDs by your Required Beginning Date (RBD), which is generally April 1 following the year you turn age 73, and annually thereafter.

Are you considering the various options for the savings you have accumulated in QRPs such as 401(k), 403(b), or governmental 457(b) plans? Know that what you choose to do with these savings can have a substantial impact on your future.

You generally have four options for your QRP distribution:

1. Roll the assets in to an IRA
2. Leave the assets in your former employer’s QRP, if the plan allows
3. Move the assets to your new/existing employer’s QRP, if the plan allows
4. Take your money out and pay the associated taxes

Each of these options has advantages and disadvantages, and the one that is best depends on your individual circumstances. You should consider features such as investment choices, fees and expenses, and services offered⁶.

It can be a confusing decision to make. Here are some things to think about:

• The difference in fees and expenses between the QRP and IRA
• When distributions can be taken with no 10% additional tax
• Your need for help making investment decisions
• The favorable tax treatment of employer securities that may have increased in value in the QRP
• When you have to begin required minimum distributions (RMDs)
• Protection of retirement assets from creditors and bankruptcy

Your Financial Advisor can help educate you regarding your choices so you can decide which one makes the most sense for your specific situation. Speak with your current retirement plan administrator and tax professional before taking any action.

There are a variety of reasons why you may want to convert a Traditional, SEP or SIMPLE⁷ IRA as well as your qualified employer-sponsored retirement plan (QRP), such as a 401(k), savings to a Roth IRA.

Some reasons conversions may be appropriate include:

• You are willing to pay taxes now for the possibility of tax-free distributions in retirement
• You do not have to take required minimum distributions (RMDs) during your lifetime
• The state you live in does not have income tax but will retire to a state with income tax

Some reasons a conversion may not be appropriate include:

• Having to deplete other assets to pay the taxes due on the conversion
• The conversion pushes you into a higher tax bracket
• You will be in a lower tax bracket in retirement

To convert, you will pay federal and, possibly, state income tax on the taxable amount of the conversion. There is no 10% additional tax on conversions made prior to age 59½. However, any amount used to pay the taxes, and not converted , is taxable and if you are under age 59½ you may owe the 10% additional tax. Also, you will not have to sell the account assets as they can be converted as an “in kind” transfer.

It is important to know what your tax situation is and your ability to pay for the conversion because once you convert you cannot recharacterize or undo the conversion. Be sure to speak with your tax professional before completing a Roth IRA conversion.

You or your spouse, if filing jointly, must have earned income for the tax year for which you are making the contribution. Generally, compensation is what you earn from working such as wages, tips, or commissions. See Publication 590-A (PDF) for a comprehensive list of what is considered earned income.