Retirement Accounts — Quick Reference

Traditional IRA vs. Roth IRA Comparison

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2024 Contribution Limits

|---|---|---|---| Combined IRA limit: The $7,000/$8,000 cap covers ALL IRA accounts combined — Traditional + Roth total cannot exceed the limit. ---

RMD Age Timeline

|---|---|---| Missed RMD penalty: Reduced from 50% to 25% by SECURE Act 2.0; further reduced to 10% if corrected within the correction window (approximately 2 years). Roth 401(k): No lifetime RMDs beginning 2024 (SECURE Act 2.0). ---

Inherited IRA: The 10-Year Rule

Who it applies to: Non-spouse beneficiaries who inherit an IRA from an owner who died on or after January 1, 2020. The rule: The entire inherited account must be distributed within 10 years of the owner's death. Annual distributions during the 10 years:

• Owner had begun RMDs before death → beneficiary must take annual distributions in years 1–9; full balance by end of year 10

• Owner had NOT begun RMDs → no annual requirement; full balance by end of year 10

Eligible Designated Beneficiaries (EDBs) — exempt from 10-year rule: |---|---| ---

Key SECURE Act 2.0 Changes (Bullet Summary)

• RMD age raised to 73 (2023); rises to 75 in 2033

• Missed RMD penalty cut from 50% → 25% (→ 10% if corrected in time)

• Roth 401(k): no more lifetime RMDs starting 2024

• Ages 60–63 "super catch-up": extra $10,000+ to 401(k)/403(b) starting 2025

• IRA catch-up ($1,000 for 50+) now indexed to inflation

• New 401(k)/403(b) plans must auto-enroll at 3%+ starting 2025

• 529-to-Roth IRA rollover: up to $35,000 lifetime starting 2024 (529 must be 15+ years old)

• Student loan payments can trigger employer 401(k) matching

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Early Withdrawal Penalty Exceptions (10% Penalty Waived)

These exceptions apply to Traditional IRA withdrawals. Note that ordinary income tax still applies even when the penalty is waived. |---|---|---| Key trap: Education and first-home exceptions waive the penalty for IRAs — but NOT for 401(k) hardship withdrawals. All 401(k) hardship withdrawals incur both income tax and the 10% penalty. ---

Plan Type Quick Comparison

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Feature	Traditional IRA	Roth IRA
Contribution tax treatment	Pre-tax (if deductible)	After-tax (never deductible)
Growth	Tax-deferred	Tax-free
Withdrawal tax	Ordinary income on all withdrawals	Tax-free if qualified
RMDs	Yes — begin at age 73	No RMDs during owner's lifetime
Income limits	Deductibility limited if covered by workplace plan	Direct contributions limited above $161k (single) / $240k (MFJ) in 2024
Best for	Expect lower tax rate in retirement	Expect higher tax rate in retirement; want flexibility; estate planning
Early withdrawal (before 59½)	Income tax + 10% penalty (exceptions apply)	Contributions always free; earnings taxed + 10% penalty if non-qualified
5-year rule	N/A	Qualified distributions require 5-year holding period AND age 59½
Account Type	Under Age 50	Age 50+	Notes
Traditional IRA	$7,000	$8,000	Combined limit with Roth IRA
Roth IRA	$7,000	$8,000	Income limits apply
401(k) / 403(b)	$23,000	$30,500	Employee deferrals only
SIMPLE IRA	$16,000	$19,500	25% penalty if withdrawn in first 2 years
SEP-IRA	25% of comp, max $69,000	Same	Employer contributions only
Total 401(k) (employee + employer)	$69,000	$76,500	Or 100% of compensation
Period	RMD Starting Age	Law
Before 2020	70½	Prior law
2020–2022	72	SECURE Act (2019)
2023–2032	73	SECURE Act 2.0 (2022)
2033 and after	75	SECURE Act 2.0 (2022)
EDB Category	Stretch Rule
Surviving spouse	Life expectancy or own IRA rollover
Minor children of owner	Until age of majority, then 10-year rule kicks in
Disabled individuals	Life expectancy
Chronically ill individuals	Life expectancy
Not more than 10 years younger than decedent	Life expectancy
Exception	IRA	401(k)
Death or disability	Yes	Yes
Age 59½+	Yes	Yes
SEPP / 72(t) payments	Yes	Yes
First-time home purchase ($10k lifetime)	Yes	No
Higher education expenses	Yes	No
Medical expenses > 7.5% AGI	Yes	Yes
Health insurance premiums (unemployed)	Yes	No
IRS levy	Yes	Yes
Separation from service at age 55+	No	Yes
Plan	Who Sponsors	Employee Deferrals	Employer Contributes	Limit (2024)
401(k)	For-profit company	Yes	Optional (matching)	$23,000 employee
403(b) / TSA	Nonprofit / school	Yes	Optional	$23,000 employee
SEP-IRA	Self-employed / small biz	No	Yes (employer only)	25% comp / $69,000
SIMPLE IRA	≤100 employees	Yes	Mandatory	$16,000 employee
Defined Benefit	Any employer	No	Yes (actuarial)	Based on formula

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Common Exam Traps

• Traditional IRA deduction: Not automatic — phased out if covered by a workplace plan above income thresholds

• Roth IRA 5-year clock: Starts January 1 of the year of the FIRST contribution — not when each contribution is made

• Roth withdrawal ordering: Contributions first (always free) → conversions → earnings (taxed + penalty if non-qualified)

• SIMPLE IRA 2-year penalty: 25% penalty (not 10%) in first 2 years of participation

• SEP-IRA: Employer contributions only — employees cannot make their own deferrals

• 401(k) education withdrawal: Does NOT avoid the 10% penalty (unlike IRA education withdrawals)

• QDRO: Only legal mechanism to split a qualified plan without tax/penalty — required for divorce settlements

• PBGC: Covers only defined benefit pension plans — does NOT cover 401(k) or other DC plans

• Roth 401(k) RMDs: Eliminated as of 2024 — no longer required during owner's lifetime

• 10-year rule: Applies to inherited IRAs from owners who died after January 1, 2020; surviving spouse is the key exception