IRA & Retirement Accounts at Merrill

MAGI = Modified Adjusted Gross Income. Limits apply to aggregate contributions across all Traditional and Roth IRAs you own. Backdoor Roth IRA strategy may be available for high earners — consult a tax advisor. Limits subject to IRS adjustment.

• When can I withdraw from my IRA without penalty?
  Both Traditional and Roth IRAs allow penalty-free withdrawals starting at age 59½. For Traditional IRAs, all withdrawals are taxable as ordinary income. For Roth IRAs, qualified withdrawals of both contributions and earnings are completely tax-free — as long as the account has been open for at least 5 years (the "5-year rule") AND you are age 59½ or older. Roth contributions (not earnings) can be withdrawn at any age without taxes or penalty.
• What are the exceptions to the 10% early withdrawal penalty?
  The 10% early withdrawal penalty has important exceptions: death or disability, substantially equal periodic payments (SEPP/72(t)), unreimbursed medical expenses exceeding 7.5% of AGI, health insurance premiums if unemployed, first-time home purchase (up to $10,000 lifetime from IRAs), higher education expenses, IRS levy on the IRA, qualified disaster distributions, birth or adoption expenses (up to $5,000), and active military reservists called to duty. Taxes still apply even when the penalty is waived.
• Can I contribute to both a Traditional and Roth IRA in the same year?
  Yes — you can contribute to both account types in the same tax year, but your combined contributions across all IRAs cannot exceed the annual limit ($7,000 for 2025; $8,000 if 50+). For example, you could contribute $4,000 to a Traditional IRA and $3,000 to a Roth IRA — the combined $7,000 is the maximum. Your Roth contribution eligibility also depends on your income meeting Roth phase-out limits.
• What are Required Minimum Distributions (RMDs)?
  RMDs are annual minimum withdrawals the IRS requires from Traditional IRAs and most employer plans starting at age 73 (per the SECURE 2.0 Act). The amount is calculated based on your account balance and IRS life expectancy tables. Failure to take the full RMD results in a 25% excise tax (reduced to 10% if corrected within 2 years). Roth IRAs do NOT have RMDs during the original owner's lifetime — one of their key advantages for estate planning purposes.
• What is a Roth conversion and when does it make sense?
  A Roth conversion moves money from a Traditional IRA (or pre-tax 401(k)) into a Roth IRA. You pay ordinary income tax on the converted amount in the year of conversion — but all future growth and qualified withdrawals become tax-free. Conversions make the most sense when: your income is temporarily lower (sabbatical, early retirement, business loss), current tax rates are lower than expected future rates, your account has declined in value (pay taxes on a lower balance), or you want to reduce future RMDs. A Roth conversion is a sophisticated strategy — consult a tax advisor.