IRA FAQs: Benefits and Rules
How does an IRA benefit me?
Many people are unsure of how much they need to save for retirement, and may fall short of their retirement savings goals. Opening a Fidelity IRA may help you accumulate money you'll need in retirement.1
Should I save in my 401(k) or my IRA?
At Fidelity, we believe that you should consider contributing the full amount of 401(k) elective deferral contributions required to receive the maximum employer match offered in your workplace retirement plan as your first priority, rather than leaving that money on the table. 401(k) deferrals are an easy way to start early and contribute regularly, with the convenience of payroll deductions.
For many savers, the simplicity and discipline of payroll deductions make the logical next step to maximize your 401(k) elective deferrals up to the 402(g) annual deferral limit, $18,000 for 2016 ($23,500 if 50 years or older). You could then open an IRA or another tax-advantaged retirement savings vehicle.
Are there income limits to contribute to an IRA?
There are no income limits for Traditional IRAs,2 however there are income limits for tax deductible contributions.
There are income limits for Roth IRAs. As a single filer, you can make a full contribution to a Roth IRA if your income is less than $117,000 ($117,000 – $132,000 for a partial contribution) in 2016. If you are married filing jointly, you can make a full contribution to a Roth IRA if your income is less than $184,000 ($184,000 – $194,000 for a partial contribution) in 2016.
How much can I contribute to my IRA?
You can contribute up to the lesser of 100% of your earned income or $5,500 for 2016. Once you reach age 50, contribution limits on IRAs increase by another $1,000, allowing those who may have put off starting to save for retirement to "catch up" on their savings by contributing an amount over the standard contribution limit.
To see how much you may be able to contribute this year, use the IRA Contribution Calculator.
If I qualify to contribute to both a Traditional IRA and Roth IRA, which one should I save in?
If you qualify for Roth IRA contributions, you should consider it. Having a mix of both pretax and Roth contributions can help create additional flexibility in retirement to respond to a great unknown—future tax rates. For people who expect income in retirement to be as high or higher than their current level, others who expect their tax rate in retirement to be higher than today, or younger people who expect steady income growth over their careers, Roth IRA contributions may be the better choice. But if you believe that your tax rates will be lower in retirement than they are now, you may want to prioritize pretax vehicles like the Traditional IRA. Our IRA Evaluator allows you to answer a few questions and find out which one might be right for you.
How much money do I need to open a Fidelity IRA?
There is no minimum dollar amount required to open a Fidelity IRA. Some mutual funds may have minimums required to purchase; review each fund’s prospectus for details.
- What does a Fidelity IRA have to offer?
How do I open a Fidelity IRA?
Open the IRA you are interested in online. It takes just a few minutes.1
Where should I invest my money?
We offer many options for investing your IRA assets, including stocks, bonds, CDs, ETFs, and mutual funds. For many investors, Fidelity’s Freedom® Funds are an easy way to invest for retirement. Simply tell us when you expect to retire and we can show you a fund that may be appropriate for that time horizon.3
Can someone help me with my investing?
Yes, Fidelity can help in a number of ways, which can give you as much or as little involvement in the management of your portfolio as you want. You can choose from one-on-one guidance from a Fidelity representative or use our online tools, such as our Planning & Guidance Center.
We also offer professional money management through Portfolio Advisory Service®.4
How can I contribute to my Fidelity IRA?
You can learn about contributing to your account by visiting the Contributing to your IRA page. Another way to put your savings on autopilot is by investing a set amount on a monthly or quarterly basis with automatic investments.
Can I withdraw money from my IRA?
Under certain conditions, you can withdraw money from your IRA without penalty. The rules vary depending on the type of IRA you have. Generally, for a Traditional IRA, distributions prior to age 59½ are subject to a 10% penalty in addition to federal and state taxes unless an exception applies.5 Starting at age 59½, you can begin taking money out of your IRA without penalty, but you will still be responsible for taxes that might be due.
Starting at age 70½, minimum required distributions (MRDs) begin—you can calculate how much you will be required to take using this MRD Calculator. You can also use our Retirement Distribution Center to get estimated MRDs for your Fidelity IRAs (Traditional IRAs, SEP IRAs, SIMPLE IRAs, Rollover IRAs, and all small-business retirement plans). Our system also keeps track of all withdrawals and allows you to set up automated distributions. Learn more about our Retirement Distribution Center.
For a Roth IRA, you can take a penalty-free, federal tax-free distribution of contributions at any time. Provided you have met the five-year aging requirement, and one of the following conditions, you may also take a tax-free and penalty-free distribution of earnings:
- Over age 59½
- Death or disability
- First-time home purchase
Note: There are no MRDs for Roth IRAs during the lifetime of the original owner.
Please review Withdrawing From Your IRA for more information.
Can I convert my existing Traditional IRA to a Roth IRA?
Yes, most investors, regardless of their income, can convert eligible retirement savings to a Roth IRA. Please speak with your tax advisor about your specific situation and whether this may make sense for you.
Can I transfer my IRA from another institution?
Yes, visit IRA Transfer for a quick overview of the online process.
Can I roll over my old 401(k) from a previous employer to my Roth or Traditional IRA?
Generally, yes. Contact our rollover specialists, and they'll guide you through the entire process—from beginning to end. Call 800-343-3548 to get started.