Traditional and Roth Individual Retirement Accounts (IRAs): A Primer




Traditional and Roth Individual Retirement
Accounts (IRAs): A Primer

Updated February 15, 2022
Congressional Research Service
https://crsreports.congress.gov
RL34397




Traditional and Roth Individual Retirement Accounts (IRAs): A Primer

Summary
In response to concerns over the adequacy of retirement savings, Congress has created incentives
to encourage individuals to save for retirement through a variety of retirement plans. Some
retirement plans are employer-sponsored, such as 401(k) plans, and others are established by
individual employees, such as Individual Retirement Accounts (IRAs).
This report describes the primary features of two common retirement savings accounts that are
available to workers for independently saving a portion of their wages or to individuals rolling
over savings from employer-sponsored plans—traditional IRAs and Roth IRAs. Individuals may
roll over eligible distributions from other retirement accounts (such as an account balance from a
401(k) plan upon leaving an employer) into IRAs. Rollovers preserve retirement savings by
allowing investment earnings on the funds in the retirement accounts to accrue on a tax-deferred
basis, in the case of traditional IRAs, or a tax-free basis, in the case of Roth IRAs. Most inflows
to Roth IRAs are from contributions; in contrast, most inflows to traditional IRAs are from
rollovers.
Both traditional and Roth IRAs offer tax incentives to encourage individuals to save for
retirement. Although the accounts have many features in common, they differ in some important
aspects, such as deductibility, eligibility to contribute, and tax treatment. Contributions to
traditional IRAs may be tax deductible for taxpayers who (1) are not covered by a retirement plan
at their place of employment or (2) have income below specified limits. Contributions to Roth
IRAs are not tax deductible and eligibility is limited to those with incomes under specified limits.
The tax treatment of distributions from traditional and Roth IRAs differs. Distributions from
traditional IRAs are generally included in taxable income, whereas qualified distributions from
Roth IRAs are not included in taxable income. Some distributions from both may be subject to an
additional 10% tax penalty, unless the distribution (1) is for a reason specified in the Internal
Revenue Code (e.g., distributions from IRAs after the individual is aged 59½ or older are not
subject to the early withdrawal penalty) or (2) meets a temporary exception in response to certain
disasters.
This report explains IRAs’ eligibility requirements, contribution limits, tax deductibility of
contributions, and withdrawal rules, and it provides data on the accounts’ holdings. It also
describes the Retirement Savings Contribution Credit (also known as the Saver’s Credit), which
is a nonrefundable tax credit of up to $1,000 ($2,000 if married filing jointly) available to
individuals with income under specified limits who make IRA (or other retirement plan)
contributions. Lastly, it explains provisions enacted after certain federally declared disasters,
starting with the Gulf of Mexico hurricanes in 2005, that exempt distributions to qualified
individuals from the 10% early withdrawal penalty.

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Contents
Introduction ..................................................................................................................................... 5
Traditional and Roth IRAs .............................................................................................................. 6
Equivalence of Traditional and Roth IRAs ............................................................................... 7
IRA Tax Benefits ....................................................................................................................... 7
Eligibility to Contribute and Contribution Limits ..................................................................... 8
Deductibility of Traditional IRA Contributions ................................................................ 10
Withdrawals ............................................................................................................................. 11
Traditional IRA Withdrawal Rules.................................................................................... 12
Roth IRA Withdrawal Rules ............................................................................................. 12
Exceptions to 10% Penalty ............................................................................................... 13
Rollovers ................................................................................................................................. 14
Certain Rollovers Limited to One per Year ....................................................................... 15
Conversions to Roth IRAs ...................................................................................................... 15
Inherited IRAs ......................................................................................................................... 16
Designated Spouse Beneficiaries ...................................................................................... 16
Designated Nonspouse Beneficiaries ................................................................................ 17
Eligible Designated Beneficiaries ..................................................................................... 17
Nondesignated or Estate Beneficiaries ............................................................................. 17

Retirement Savings Contribution Credit ....................................................................................... 18
Data on IRA Assets, Sources of Funds, Ownership, and Contributions ........................................ 19
Assets in IRAs ......................................................................................................................... 20
IRA Ownership Among U.S. Households ............................................................................... 20
Contributions to IRAs ............................................................................................................. 24

Tables
Table 1. Roth IRA Eligibility and Annual Contribution Limits for 2021 and 2022 ........................ 9
Table 2. Deductibility of Traditional IRA Contributions for Individuals Not Covered by a
Retirement Plan at Work for 2021 and 2022 ............................................................................... 11
Table 3. Deductibility of Traditional IRA Contributions for Individuals
Covered by a Retirement Plan at Work for 2021 and 2022 ......................................................... 11
Table 4. Inherited IRA Distribution Rules ..................................................................................... 18
Table 5. Retirement Saving Contribution Credit Income Limits for 2021 and 2022 .................... 19
Table 6. Traditional and Roth IRAs: End of Year Assets............................................................... 20
Table 7. Ownership and Account Balances for IRAs in 2019 ....................................................... 22
Table 8. Distribution of Individual Retirement Account (IRA) Balances in 2019 ........................ 24
Table 9. Contributions to Traditional IRAs ................................................................................... 25
Table 10. Contributions to Roth IRAs ........................................................................................... 26

Table A-1. Penalty-Free Distributions from Retirement Plans in Response to Federally
Declared Disasters ...................................................................................................................... 28

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Appendixes
Appendix. Qualified Distributions Related to Federally Declared Disasters and COVID-
19 ................................................................................................................................................ 27

Contacts
Author Information ........................................................................................................................ 33
Acknowledgments ......................................................................................................................... 33

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Introduction
Individual Retirement Accounts (IRAs) are tax-advantaged accounts that individuals (or married
couples) can establish to accumulate funds for retirement. Depending on the type of IRA,
contributions may be made on a pretax or post-tax basis, and investment earnings are either tax-
deferred or tax-free.1 In addition, workers can roll over savings from employer-sponsored
retirement savings plans into IRAs to preserve their savings’ tax advantages.
IRAs were first authorized by the Employee Retirement Income Security Act of 1974 (ERISA;
P.L. 93-406). IRAs were originally limited to workers without pension coverage, but the
Economic Recovery Act of 1981 (P.L. 97-34) made all workers and spouses eligible for IRAs.
The Tax Reform Act of 1986 (P.L. 99-514) limited the eligibility for tax-deductible contributions
to individuals whose employers do not sponsor plans and to those whose employers sponsor plans
but who have earnings below specified thresholds. The Taxpayer Relief Act of 1997 (P.L. 105-34)
allowed for penalty-free withdrawals for qualified higher education expenses and authorized the
Roth IRA, which provides tax-free growth from after-tax contributions.
The Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16) significantly
affected the contribution limits in these plans in three ways: it (1) increased the limits, (2) indexed
the limits to inflation, and (3) allowed for individuals aged 50 and older to make additional
“catch-up” contributions. Among other provisions, the Pension Protection Act of 2006 (PPA; P.L.
109-280) made permanent the indexing of contribution limits to inflation, allowed taxpayers to
direct the Internal Revenue Service (IRS) to deposit tax refunds directly into an IRA, and
temporarily allowed for certain tax-free distributions for charitable contributions (which was later
made permanent by P.L. 114-113).2
The Gulf Opportunity Zone Act of 2005 (P.L. 109-135) temporarily authorized penalty-free IRA
(or other retirement plan) distributions of up to $100,000 for qualified individuals affected by
Hurricanes Katrina, Rita, or Wilma. Since then, various laws have provided similar relief for
other federally declared disasters (see Appendix).
The Setting Every Community up for Retirement Enhancement Act of 2019 (SECURE Act),
enacted as Division O of the Further Consolidated Appropriations Act, 2020 (P.L. 116-94),
included multiple provisions related to IRAs. The SECURE Act
 repealed the maximum age at which individuals can contribute to traditional
IRAs;
 increased the age at which required minimum distributions (RMDs) from
traditional IRAs must begin;
 treated certain nontuition fellowship and stipend payments as compensation for
IRA contribution purposes;
 treated tax-exempt “difficulty of care” payments to home healthcare providers as
compensation for nondeductible IRA contribution limit purposes;
 allowed penalty-free early withdrawals for qualifying birth and adoption
purposes; and

1 For more information on the tax treatment of retirement savings, including Individual Retirement Accounts (IRAs),
see U.S. Congress, Joint Committee on Taxation, Present Law and Background Relating to the Tax Treatment of
Retirement Savings
, prepared by Joint Committee on Taxation, 112th Cong., 2nd sess., April 13, 2012, JCX-32-12.
2 See also 26 U.S.C. §408 for traditional IRAs and 26 U.S.C. §408A for Roth IRAs.
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 modified distribution rules for inherited IRAs.
This report describes the two types of IRAs that individual workers can establish: traditional
IRAs and Roth IRAs.3 It describes the rules regarding eligibility, contributions, and withdrawals.
It also describes a tax credit for retirement savings contributions. An Appendix describes the
relief provided to those affected by certain federally declared disasters, starting with the Gulf of
Mexico hurricanes in 2005.
Traditional and Roth IRAs
Traditional IRAs are funded by workers’ contributions, which may be tax deductible (depending
on the IRA owner’s household income and workplace pension coverage). The contributions may
accrue investment earnings in an account, and these earnings can be used as a source of income in
retirement. Taxes are paid on both contributions and any interest earnings when funds are
distributed. Because income tax rates in retirement are often lower than during working life,
traditional IRA holders are likely to pay less in taxes when contributions are withdrawn than
when the income was earned.
Roth IRAs were authorized by the Taxpayer Relief Act of 1997 (P.L. 105-34). One key difference
between traditional and Roth IRAs is that contributions to Roth IRAs are made with after-tax
funds and qualified distributions are not included in taxable income; investment earnings accrue
free of taxes.4
For both traditional and Roth IRAs, funds are typically taxed only once—at either the time of
contribution (in the case of Roth IRAs) or the time of withdrawal (in the case of traditional IRAs).
This concept underlies many of the differences between traditional and Roth IRAs that follow
throughout this report (for example, why traditional IRAs are subject to annual withdrawals in
retirement while Roth IRAs are not).5
Contributions to IRA can be made from taxable and certain nontaxable compensation. Examples
of compensation include wages, salaries, tips, commissions, self-employment income, nontaxable
combat pay, and alimony (which is treated as compensation for IRA purposes).6 Compensation
also includes nontuition fellowship and stipend payments (i.e., payments to individuals that are
used in the pursuit of graduate or postdoctoral study).7
Because IRAs were intended for workers without employer-sponsored pensions to save for
retirement, contributions to an IRA may come only from compensation, as listed above. The
following noncompensation sources of income cannot be used for IRA contributions:
 earnings from property, interest, or dividends,
 pension or annuity income,
 deferred compensation,

3 There are also two types of IRA-based retirement plans available to small employers: Simplified Employee Pensions
(SEP-IRA) and Savings Incentive Match Plans for Employees (SIMPLE-IRA). These are not discussed in this report.
4 Roth IRAs are named for former Senator William Roth.
5 Individuals who inherit Roth IRAs may be subject to annual withdrawals.
6 See Internal Revenue Service (IRS), Tax Topic Number 451 - Individual Retirement Arrangements (IRAs), at
https://www.irs.gov/taxtopics/tc451. Alimony is included as compensation for IRA contribution purposes but only with
respect to divorces that were executed on or before December 31, 2018.
7 Section 106 of the SECURE Act (Division O of P.L. 116-94) added this provision.
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Traditional and Roth Individual Retirement Accounts (IRAs): A Primer

 income from partnerships for which an individual does not provide services that
are a material income-producing factor, and
 foreign earned income.
IRAs can be set up through many financial institutions, such as banks, credit unions, mutual
funds, life insurance companies, or stock brokerages. These financial institutions offer an array of
investment choices. Individuals can transfer their accounts from one financial institution to
another at will.
Several transactions could result in additional taxes or the loss of IRA status. These transactions
include borrowing from IRAs; using IRAs as collateral for loans; selling property to IRAs; and
investing in collectibles such as artwork, antiques, metals, gems, stamps, alcoholic beverages, and
most coins.8
Equivalence of Traditional and Roth IRAs
Under certain assumptions, traditional and Roth IRAs provide individuals with identical amounts
to spend in retirement. These assumptions include (1) identical tax rates at the time of
contribution and withdrawal and (2) equal investment growth in the traditional and Roth
accounts.
Stylized examples may help illustrate this concept. An individual who has $100 in pre-tax income
and faces a 25% tax rate could contribute $75 to a Roth IRA. Assume the investment doubles in
value to $150. In retirement, the qualified withdrawal would not be included in taxable income.
The individual would receive $75 plus $75 in investment earnings, or $150.
Alternatively, the same individual could contribute $100 to a deductible traditional IRA.9 Assume
the investment doubles in value to $200. In retirement, the distribution would be taxed at a 25%
tax rate. The individual owes taxes of $50 (25% of the $100 contribution plus 25% of the
investment earnings). The individual would receive $75 plus $75 in investment earnings, or $150.
Note that because an individual’s income tax rate in retirement is likely to be different than his or
her tax rate while working, in practice, traditional and Roth IRAs would probably not provide
equal amounts in retirement.
IRA Tax Benefits
Traditional IRA tax benefits are structured as tax deferrals rather than tax deductions. A tax
deduction refers to a one-time reduction in taxable income. A deferral means that tax liability is
postponed to some point in the future, so even if an individual deducts contributions, the
individual must pay taxes on these contributions (and any earnings) at withdrawal. This implies
that the tax benefit of IRAs is not the up-front deduction but rather the difference between the
after-tax investment gains resulting from an IRA versus a taxable account. As described in the

8 Gold, silver, and platinum coins issued by the U.S. Treasury and gold, silver, palladium, and platinum bullion are
permissible.
9 An individual making a $100 deductible contribution to an IRA would, assuming a 25% tax rate, receive a $25 tax
deduction, effectively making the traditional IRA contribution equal to a $75 Roth IRA contribution. The traditional
IRA contribution is a larger base on which investment earnings can accrue, so the account balance at withdrawal is
larger than that of a Roth IRA. Upon withdrawal, the individual would pay taxes on the traditional IRA distribution but
not on a Roth IRA distribution, so the after-tax distribution from each would be equivalent.
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previous section, traditional IRA tax deferral is equivalent to Roth IRA treatment under certain
assumptions. It follows that the tax benefit is also the same.
The benefit of contributing to an IRA rather than a taxable account (e.g., a mutual fund) for an
individual eligible to contribute to a traditional or Roth IRA depends on several factors. These
include the rate of return on investments, the type of investment income (e.g., capital gains versus
dividends), and the time period over which investment earnings accrue.10
This tax benefit is often described as an effectively tax-free rate of return on investment earnings
and applies to both traditional and Roth IRAs.11
Continuing with the equivalence example from above, instead of contributing to an IRA, the same
individual could contribute to a taxable account. Because contributions to taxable accounts are
not deductible, the individual could put $75 into the account. The $75 would accrue investment
earnings, and—depending on the type—these earnings would be taxed annually (in the case of
dividends) or when the investment is sold (capital gains).12 If investment earnings in the taxable
account accrue at the same rate as those in the traditional and Roth IRA example described
earlier, and the individual faces a 25% tax rate on these earnings annually, the individual would
receive less in after-tax withdrawals when contributing to a taxable account compared to an IRA.
In practice, traditional and Roth IRA owners may receive an additional benefit if tax rates are
different at the time of contribution and withdrawal.13
Eligibility to Contribute and Contribution Limits
Eligibility to make contributions differs between traditional and Roth IRAs and is based on
household income. Eligible individuals may contribute either their gross compensation or the
contribution limit, whichever is lower. In 2022, the annual contribution limit is $6,000.14 Since
2009, the contribution limit has been subject to cost-of-living adjustments.15 Individuals aged 50
and older may make additional annual $1,000 catch-up contributions. For households that file a
joint return, spouses may contribute an amount equal to the couple’s total compensation (reduced
by the spouse’s IRA contributions) or the contribution limit ($6,000 each, if younger than the age
of 50, and $7,000 each, if aged 50 and older), whichever is lower. Contributions that exceed the
contribution limit and are not withdrawn by the due date for that year’s tax return are considered
excess contributions and are subject to a 6% “excess contribution” tax. Contributions made
between January 1 and April 15 may be designated for either the current year or the previous year.

10 See Peter Brady, “The Tax Benefits and Revenue Costs of Tax Deferral,” ICI, 2012, pp. 4-5, https://www.ici.org/pdf/
ppr_12_tax_benefits.pdf.
11 Brady, “The Tax Benefits and Revenue Costs of Tax Deferral.” The author points out that a more exact way to
express the effectively tax-free rate of return on investment earnings is to say that the tax benefit is “equivalent to
facing a zero rate of tax on the investment income that would have been generated if compensation was first subject to
tax and the net-of-tax amount was then contributed to an investment account.”
12 Investment earnings can include dividends, interest, capital gains, and others. Some earnings (e.g., dividends) are
taxed annually, while others are taxed when realized.
13 The benefit might also depend on an individual’s eligibility (based on income and tax filing status) to deduct
contributions to a traditional IRA.
14 The limit applies to all of an individual’s IRAs. For example, an individual could contribute $3,000 to a traditional
IRA and $3,000 to a Roth IRA in a single year.
15 26 U.S.C. §415 requires the adjustments be made with procedures used to adjust Social Security benefit amounts. For
more information on Social Security adjustments, see CRS Report 94-803, Social Security: Cost-of-Living Adjustments.
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Traditional IRAs. Any individuals who receive taxable (and certain nontaxable) compensation
can set up and contribute to traditional IRAs.16
Roth IRAs. In contrast to traditional IRAs, Roth IRAs have income limits for eligibility. Table 1
lists the modified AGIs at which individuals may make the maximum contribution and the ranges
in which this contribution limit is reduced.17 For example, a 40-year-old single taxpayer with
income of $90,000 may contribute $6,000 in 2022. A similar taxpayer making $130,000 would be
subject to a reduced contribution limit, whereas a taxpayer with income of $145,000 would be
ineligible to contribute to a Roth IRA.
Table 1. Roth IRA Eligibility and Annual Contribution Limits for 2021 and 2022
2021 Modified
2022 Modified
Adjusted
Adjusted
Gross Income
2021 Contribution
Gross Income
2022 Contribution
Filing Status
(AGI)
Limits
(AGI)
Limits
$6,000 ($7,000 if 50
$6,000 ($7,000 if 50
Less than
years or older) or
Less than
years or older) or AGI,
$125,000
AGI, whichever is
$129,000
Single, head of
whichever is smaller
smaller
household, married
filing separately (and
At least
At least
did not live with
Reduced contribution
$129,000 but
Reduced contribution
$125,000 but less
spouse at any time
limit
less than
limit
than $140,000
during the year)
$144,000
$140,000 or
Ineligible to
$144,000 or
Ineligible to contribute
more
contribute
more
Married filing
Less than
Reduced contribution
Less than
Reduced contribution
separately and lived
$10,000
limit
$10,000
limit
with spouse at any
Ineligible to
time during the year
$10,000 or more
$10,000 or more
Ineligible to contribute
contribute
$6,000 ($7,000 each
$6,000 ($7,000 each if
Less than
if 50 and older) or
Less than
50 and older) or AGI,
$198,000
AGI, whichever is
$204,000
whichever is smaller
smaller
Married filing jointly,
At least
At least
qualifying widow(er)
Reduced contribution
$204,000 but
Reduced contribution
$198,000 but less
limit
less than
limit
than $208,000
$214,000
$208,000 or
Ineligible to
$214,000 or
Ineligible to contribute
more
contribute
more
Sources: IRS Publication 590-A, available at http://www.irs.gov/publications/p590a/; and IRS, “Amount of Roth
IRA Contributions That You Can Make for 2022,” at https://www.irs.gov/retirement-plans/plan-participant-
employee/amount-of-roth-ira-contributions-that-you-can-make-for-2022.

16 The SECURE Act (Division O of P.L. 116-94) repealed the maximum age at which individuals may contribute to
IRAs. Prior to the SECURE Act, individuals were not allowed to contribute to traditional IRAs after reaching age 70½.
17 If warranted, the income limits are increased for cost-of-living adjustments. See IRS, 2020 Limitations Adjusted as
Provided in Section 415(d), etc.
, Notice 2019-59, at https://www.irs.gov/pub/irs-drop/n-19-59.pdf; and IRS, 2021
Limitations Adjusted as Provided in Section 415(d), etc.
, Notice 2020-79, at https://www.irs.gov/pub/irs-drop/n-20-
79.pdf. Modified AGI is AGI minus certain expenses an individual may deduct. A worksheet for computing modified
AGI is provided in Worksheet 1-1, at https://www.irs.gov/publications/p590a#en_US_2021_publink100025076.
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Notes: Individuals aged 50 and older can make additional $1,000 catch-up contributions. The modified adjusted
gross income (AGI) limit for eligibility has been adjusted for inflation since 2007. Beginning in 2009, the
traditional and Roth IRA contribution limit has also been adjusted for inflation. Modified AGI is AGI minus
certain expenses an individual may deduct. A worksheet for computing modified AGI is provided in Worksheet
1-1, at https://www.irs.gov/publications/p590a#en_US_2021_publink100025076. A worksheet for computing
reduced Roth IRA contribution limits is provided in IRS Publication 590-A.
Deductibility of Traditional IRA Contributions
Traditional IRA contributions may be non-tax-deductible, partially tax-deductible, or fully tax-
deductible, depending on whether the individual or spouse is covered by a pension plan at work
and their level of adjusted gross income (AGI).18 Roth IRA contributions are not deductible.
Individuals are covered by a retirement plan if (1) the individuals or their employers have made
contributions to a defined contribution pension plan or (2) the individuals are eligible for a
defined benefit pension plan (even if they refuse participation).
For individuals and households not covered by a retirement plan at work, Table 2 outlines the
income levels at which they may deduct all, some, or none of their traditional IRA contributions,
depending on the spouse’s pension coverage and the household’s AGI. Individuals without
employer-sponsored pensions and, if married, whose spouse also does not have pension coverage,
may deduct up to the contribution limit from their income taxes regardless of their AGI.
For individuals and households who are covered by a retirement plan at work, Table 3 outlines
the income levels at which they may deduct all, some, or none of their IRA contributions,
depending on the individual’s or household’s AGI.
Individuals may still contribute to IRAs up to the contribution limit even if the contribution is
nondeductible.19 Nondeductible contributions come from post-tax income, not pretax income.
One advantage to placing post-tax income in traditional IRAs is that any investment earnings on
nondeductible contributions are not taxed until distributed.
Contributions greater than the contribution limits are considered excess contributions. Worksheets
for computing partial deductions are included in “IRS Publication 590-A, Contributions to
Individual Retirement Arrangements (IRAs).”20

18 IRS, “Definition of Adjusted Gross Income,” at https://www.irs.gov/e-file-providers/definition-of-adjusted-gross-
income.
19 Tax-exempt “difficulty of care” payments to home health care workers (i.e., payments for the additional care needed
for certain qualified foster individuals) are treated as compensation for nondeductible IRA contribution limit purposes.
Section 116 of the SECURE Act (Division O of P.L. 116-94) added this provision. Individuals with “difficulty of care”
payments may increase their nondeductible IRA contribution limit (in 2020, this limit is the individual’s taxable
income, up to $6,000 [$7,000 for individuals aged 50 and older]) by some or all of the amount of these payments. See
IRS, Publication 590-A, at https://www.irs.gov/publications/p590a#en_US_2019_publink100031635. These payments
do not affect deductibility.
20 The publication is available on the IRS website at http://www.irs.gov/publications/p590a.
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Table 2. Deductibility of Traditional IRA Contributions for Individuals
Not Covered by a Retirement Plan at Work for 2021 and 2022
2021 Adjusted
2022 Adjusted
Deduction
Filing Status
Gross Income
Gross Income
Allowed
Single, head of household, qualifying widow(er), or
Any amount
Any amount
Full
married filing jointly or separately with a spouse
deduction
who is not covered by a plan at work
Married filing jointly with a spouse who is covered
$198,000 or less
$204,000 or less
full deduction
by a plan at work
More than
More than
Partial
$198,000 but less
$204,000 but less
deduction
than $208,000
than $214,000
$208,000 or more
$214,000 or more
No
deduction
Married filing separately with a spouse who is
Less than $10,000
Less than $10,000
Partial
covered by a plan at work
deduction
$10,000 or more
$10,000 or more
No
deduction
Sources: IRS Publication 590-A, at http://www.irs.gov/publications/p590a/ and 2022 Limitations Adjusted as
Provided in Section 415(d), etc.
, Notice 2021-61, at https://www.irs.gov/pub/irs-drop/n-21-61.pdf.
Table 3. Deductibility of Traditional IRA Contributions for Individuals
Covered by a Retirement Plan at Work for 2021 and 2022
2021 Adjusted Gross
2022 Adjusted
Deduction
Filing Status
Income
Gross Income
Allowed
Single or head of household
$66,000 or less
$68,000 or less
Full deduction
More than $66,000 but less
More than $68,000 but less
Partial deduction
than $76,000
than $78,000
$76,000 or more
$78,000 or more
No deduction
Married filing jointly or
$105,000 or less
$109,000 or less
Full deduction
qualifying widow(er)
More than $105,000 but less More than $109,000 but less
Partial deduction
than $125,000
than $129,000
$125,000 or more
$129,000 or more
No deduction
Married filing separately
Less than $10,000
Less than $10,000
Partial deduction
$10,000 or more
$10,000 or more
No deduction
Sources: IRS Publication 590-A, at http://www.irs.gov/publications/p590a/ and 2022 Limitations Adjusted as
Provided in Section 415(d), etc.
, Notice 2021-61, at https://www.irs.gov/pub/irs-drop/n-21-61.pdf.
Withdrawals
Withdrawals from IRAs can be made for any reason, unlike those from defined contribution
plans, such as a 401(k) plan. Withdrawal rules depend on whether the withdrawal comes from a
traditional or Roth IRA.
In addition to any taxes owed, some IRA distributions may be subject to a 10% penalty, such as
early distributions from traditional IRAs and nonqualified distributions from Roth IRAs.
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Traditional IRA Withdrawal Rules
Withdrawals of deductible contributions and any investment earnings from traditional IRAs are
subject to income tax in the year that they are received. Withdrawals of any earnings attributable
to nondeductible contributions are subject to income tax in the year that they are received.
Early distributions. Early distributions are withdrawals made before the age of 59½ and are
subject to an additional 10% penalty unless an exception applies (e.g., death, disability, qualified
birth or adoption expense; see “Exceptions to 10% Penalty” section later in this report).
Regular withdrawals. Withdrawals may be made penalty free after the IRA owner reaches age
59½.
Required distributions. To ensure that IRAs are used for retirement income and not for
bequests, traditional IRA holders must begin making withdrawals by April 1 of the year after
reaching the age of 72 (i.e., the required beginning date).21 The minimum amount that must be
withdrawn (i.e., the required minimum distribution, or RMD) for each year is calculated by
dividing the account balance on December 31 of the year preceding the distribution by the IRA
owner’s life expectancy as found in IRS Publication 590-B.22 Although females live longer on
average than males, the IRS does not separate life expectancy tables for males and females for
this purpose.23 RMDs must be received by December 31 of each year. Failure to take the RMD
results in a 50% excise tax on the amount that was required to have been distributed. Congress
suspended the RMD for 2009 and 2020.24
Roth IRA Withdrawal Rules
The three types of Roth IRA distributions are (1) returns of regular contributions, (2) qualified
distributions, and (3) nonqualified distributions. Returns of regular contributions and qualified
distributions are not included as part of taxable income.
Return of Regular Contributions. Roth IRA distributions that are a return of regular
contributions, which are withdrawals of original contributions, are neither included in taxable
income nor subject to the 10% penalty.
Qualified Distributions. Qualified distributions, which include earnings on contributions, must
satisfy both of the following:
 they are made after the five-year period beginning with the first taxable year
for which a Roth IRA contribution was made, and

21 Section 114 of the SECURE Act (Division O of P.L. 116-94) modified the age at which individuals must begin
taking RMDs from 70½ to 72. The provision applies to account owners who turn age 70½ on or after January 1, 2020.
22 Life expectancy is calculated differently depending on whether the account holder (1) is single and an IRA
beneficiary, (2) has a spouse who is more than 10 years younger, (3) has a spouse who is not more than 10 years
younger, (4) whose spouse is not the sole beneficiary, or (5) is unmarried.
23 See, for example, the Social Security Actuarial Life Table, at https://www.ssa.gov/oact/STATS/table4c6.html. The
Supreme Court ruled in Arizona Governing Comm. vs. Norris, 463 U.S. 1073 (1983), that employer-provided pension
plans must use unisex tables in calculating monthly annuity benefits. Citing this ruling, the IRS constructs its own
unisex life expectancy tables. See 26 U.S.C. §417(e)(3)(A)(ii).
24 For more information on the 2009 RMD suspension, see CRS Report R40192, Early Withdrawals and Required
Minimum Distributions in Retirement Accounts: Issues for Congress
. For more information on the 2020 RMD
suspension, see CRS In Focus IF11482, Retirement and Pension Provisions in the Coronavirus Aid, Relief, and
Economic Security Act (CARES Act)
and CRS Insight IN11441, Internal Revenue Service (IRS) Guidance for
Coronavirus-Related Distributions, Plan Loans, and Required Minimum Distribution (RMD) Rollovers
.
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 they are made on or after the age of 59½; because of disability; to a
beneficiary or estate after death; or to purchase, build, or rebuild a first home
up to a $10,000 lifetime limit.25
Nonqualified Distributions. Distributions that are neither returns of regular contributions nor
qualified distributions are considered nonqualified distributions. A 10% penalty applies to
nonqualified distributions unless the account holder meets one of the exceptions in Title 26,
Section 72(t), of the U.S. Code or a temporary exception due to a federally declared disaster (see
“Exceptions to 10% Penalty” section below).
Although individuals might have several Roth IRAs from which withdrawals can be made, for tax
purposes nonqualified distributions are assumed to be made in the following order:
1. the return of regular contributions,
2. conversion contributions on a first-in-first-out basis,26 and
3. earnings on contributions.
The taxable portion of any nonqualified distribution (e.g., earnings on contributions) may be
included in taxable income. A worksheet is available in IRS Publication 590-B to determine the
taxable portion of nonqualified distributions.
Roth IRA owners do not have to take RMDs (though individuals who inherit Roth IRAs may be
required to take them).
Beginning in 2007, distributions from traditional or Roth IRAs after the age of 70½ could be
made directly to qualified charities and excluded from gross income. This provision for Qualified
Charitable Distributions was made permanent in P.L. 114-113.27
Exceptions to 10% Penalty
To discourage the use of IRA funds for preretirement uses, early distributions from traditional
IRAs and nonqualified distributions from Roth IRAs are subject to federal income tax and an
additional 10% tax penalty unless an exception applies.28 The early withdrawal penalty does not
apply if the IRA owner is younger than age 59½ and the distributions
 occur if the individual is a beneficiary of a deceased IRA owner;
 occur if the individual is disabled;
 are in substantially equal payments over the account holder’s life expectancy;
 are received after separation from employment after the age of 55;
 are for unreimbursed medical expenses in excess of 7.5% of AGI (10% if under
age 65);
 are for medical insurance premiums in the case of unemployment;

25 The five-year period is not necessarily five calendar years. Contributions made from January 1 to April 15 could be
considered made in the previous tax year.
26 Conversion contributions are amounts attributable to rollovers from traditional IRAs or other employer-sponsored
plans (discussed later in this report).
27 See CRS In Focus IF11377, Qualified Charitable Distributions from Individual Retirement Accounts. The SECURE
Act did not modify the age at which qualified charitable distributions can be made.
28 See 26 U.S.C. §72(t).
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 are used for higher education expenses;29
 are used to build, buy, or rebuild a first home up to a $10,000 withdrawal limit;
 are used for expenses related to the qualified birth or adoption of a child (up to a
$5,000 withdrawal limit taken within one year following the event);30 or
 occur if the individual is a reservist called to active duty after September 11,
2001.
In response to various federally declared disasters and the Coronavirus Disease 2019 (COVID-
19) pandemic, Congress has temporarily exempted distributions to those affected from the 10%
early withdrawal penalty. For example, in response to COVID-19, Congress permitted qualified
individuals to take penalty-free distributions of up to $100,000 from retirement accounts from
January 1, 2020, and before December 31, 2020 (P.L. 116-136). Details of these various relief
provisions are provided in the Appendix.
Although early withdrawals from IRAs are permitted without reason, individuals will be subject
to the 10% tax penalty unless they meet one of the conditions above. There are no other general
“hardship” exceptions for penalty-free distributions from IRAs.
Rollovers
Rollovers are transfers of assets from one retirement plan to another upon separation of the
worker from the original employer. Rollovers are not subject to the 59½ rule, the 10% penalty, or
the contribution limit.
 Rollovers to traditional IRAs can come from other traditional IRAs, employers’
qualified retirement plans (e.g., 401(k) plans), deferred compensation plans of
state or local governments (Section 457 plans), tax-sheltered annuities (Section
403(b) plans), or the Thrift Savings Plan (TSP) for federal employees.
 Rollovers to Roth IRAs can come from other Roth IRAs, traditional IRAs,
employers’ qualified retirement plans (e.g., 401(k) plans)—including from
designated Roth accounts within qualified plans, deferred compensation plans of
state or local governments (Section 457 plans), tax-sheltered annuities (Section
403(b) plans), or the TSP for federal employees. Rollovers from a pre-tax
account (such as a traditional IRA) to a Roth IRA are referred to conversions
(described in more detail below).
 Rollovers from Roth IRAs to traditional IRAs or to employer-sponsored
retirement plans are not allowed.31 Similarly, rollovers from designated Roth
accounts in qualified plans to traditional IRAs are not allowed.
Rollovers can be either direct trustee-to-trustee transfers or issued directly to individuals who
then deposit the rollovers into traditional IRAs.32 In the latter case, individuals have 60 days from
the date of the distribution to make rollover contributions. Rollovers not completed within 60
days are considered taxable distributions and may be subject to the 10% early withdrawal penalty.

29 Higher education expenses are those defined in Title 26, Section 529(e)(3), of the U.S. Code for the education of the
taxpayer, the taxpayer’s spouse, child, or grandchild.
30 Section 113 of the SECURE Act (Division O of P.L. 116-94) added this provision. This provision is effective for
distributions made after December 31, 2019.
31 See IRS Rollover Chart, at https://www.irs.gov/pub/irs-tege/rollover_chart.pdf.
32 A trustee-to-trustee transfer is a transfer of funds made directly between two financial institutions. The individual
does not take possession of the funds at any point.
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In addition, in cases where individuals directly receive a rollover, 20% of the rollover is withheld
for tax purposes and individuals must have an amount equal to the 20% withheld available from
other sources to place in the new IRA. If the entire distribution is rolled over within 60 days, the
amount withheld is applied to individuals’ income taxes paid for the year. Direct trustee-to-trustee
transfers are not subject to withholding taxes.
Certain Rollovers Limited to One per Year
A January 2014 U.S. Tax Court decision required that, in certain circumstances, individuals are
limited to a total of one rollover per year for their IRAs.33 Rollovers subject to this rule are those
between two IRAs in which an individual receives funds from an IRA and deposits the funds into
a different IRA within 60 days. The one-rollover-per-year limit applies to rollovers between two
traditional IRAs or two Roth IRAs. It does not apply to rollovers from a traditional IRA to a Roth
IRA (i.e., a conversion). The limitation does not apply to trustee-to-trustee transfers (directly from
one financial institution to another) or rollovers from qualified pension plans (such as from
401(k) plans).
Conversions to Roth IRAs
Individuals may convert amounts from traditional IRAs, SEP-IRAs, or SIMPLE-IRAs to Roth
IRAs.34 Since 2008, individuals have been able to roll over distributions directly from qualified
retirement plans to Roth IRAs. Individuals may want to roll over funds from qualified plans to
Roth IRAs for various reasons, such as greater withdrawal flexibility or more investment options.
In addition, in certain cases, it may be advantageous from a tax perspective (for example, an
individual might convert amounts during a year in which he or she faces low tax rates).
The amount of the conversion must be included in taxable income. Conversions can be a trustee-
to-trustee transfer, a same-trustee transfer by redesignating the IRA as a Roth IRA, or a rollover
directly to the account holder. Inherited IRAs cannot be converted.
Contributions (not rollovers or conversions) made to a traditional or Roth IRA can be
recharacterized as having been made to the other type of IRA. However, conversions and
rollovers to a Roth IRA made during or after 2018 cannot be recharacterized to a traditional
IRA.35
Rollover rules that apply to traditional IRAs, including completing a rollover within 60 days, also
apply to Roth IRAs. In addition, withdrawals from a converted IRA prior to five years from the

33 See Bobrow v. Commissioner, T.C. Memo. 2014-21 (United States Tax Court 2014), at https://www.ustaxcourt.gov/
UstcInOp/OpinionViewer.aspx?ID=377. The court case addressed a situation in which an individual and his spouse
used the 60-day rollover period to continuously move amounts from one IRA to another, thereby gaining access to
funds for an extended period of time. Prior to this decision, the IRS applied the one-rollover-per-year on an IRA-by-
IRA basis.
34 Simplified Employee Pensions (SEP-IRAs) and Savings Incentive Match Plans for Employees (SIMPLE-IRAs) are
employer-sponsored IRAs available to small employers. SIMPLE-IRAs may be rolled over after two years. Prior to
January 1, 2010, only individuals with income under specified thresholds were eligible to make conversions from
traditional to Roth IRAs. The Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222) eliminated the
income thresholds.
35 A provision in P.L. 115-97 (a budget reconciliation bill that was originally called the Tax Cuts and Jobs Act)
repealed a special rule that allowed conversions and rollovers to be recharacterized. Prior to the repeal of the special
rule, an individual could have rolled amounts from a traditional IRA to a Roth IRA and then, prior to the due date of
the individual’s tax return, could have transferred the assets back to a traditional IRA. In certain circumstances, this
could have a beneficial effect on an individual’s taxable income.
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beginning of the year of conversion are nonqualified distributions and are subject to a 10%
penalty (see “Nonqualified Distributions” earlier in this report).
Individuals who are ineligible to contribute to Roth IRAs due to income limits may be able to
fund Roth IRAs through what is informally referred to as a backdoor Roth IRA. In this case,
individuals may make contributions to traditional IRAs (typically nondeductible contributions,
due to income thresholds for deductibility) and then convert their traditional IRA funds to Roth
IRA funds.36
Inherited IRAs
When the owner of an IRA dies, ownership passes to the account’s designated beneficiary or, if
no beneficiary has been named, to the decedent’s estate. Section 401 of the SECURE Act
(Division O of P.L. 116-94) modified distribution rules for designated beneficiaries of account
owners who die after December 31, 2019. The following distribution rules apply to these
accounts. Federal law has different distribution requirements depending on whether the new
owner is a
 designated spouse beneficiary,
 designated nonspouse beneficiary,
 eligible designated beneficiary, or
 nondesignated or estate beneficiary.
Some distribution rules depend on whether the IRA owner died prior to the required beginning
date, which is the date on which distributions from the account must begin. This is April 1 of the
year following the year in which the IRA owner reaches the age of 72.
The Roth IRA’s original owner does not have to take an RMD (and therefore, has no required
beginning date). Following the initial account owner’s death, the Roth IRA beneficiary must take
an RMD using the same rules that apply to traditional IRAs as if the account owner had died
before the required beginning date.
Designated Spouse Beneficiaries
A designated spouse beneficiary is allowed to (1) become the new account owner; (2) roll over
the account to the spouse’s own traditional or Roth IRA or qualified employer plan, such as a
401(k), 403(a), 403(b), or 457(b) plan; or (3) be treated as a beneficiary rather than account
owner (in this case, see the rules for eligible designated beneficiaries below).
A spouse who takes ownership of an inherited traditional IRA must determine the RMD using his
or her own life expectancy. A spouse who takes ownership of an inherited Roth IRA (rather than
becoming a beneficiary) does not have to take an RMD. A spouse who is the sole beneficiary and
chooses to be treated as beneficiary (rather than as owner) may postpone distributions until the
original owner would have reached age 72. This rule applies to both traditional and Roth IRAs.

36 For more information on backdoor Roth IRAs, see CRS In Focus IF11963, Rollovers and Conversions to Roth IRAs
and Designated Roth Accounts: Proposed Changes in Budget Reconciliation
.
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Designated Nonspouse Beneficiaries
A nonspouse beneficiary cannot take ownership of an inherited account. Instead, the account
becomes an inherited IRA designated for the nonspouse beneficiary in the name of the deceased
account owner.
Under the SECURE Act, a designated nonspouse beneficiary of an account owner who dies after
December 31, 2019, must distribute the entire account balance by the end of the 10th calendar
year following the account owner’s year of death (the “10-year rule”), regardless of whether the
original account owner dies before or after the required beginning date. Beneficiaries may choose
the frequency and timing of distributions so long as the account is depleted within the 10-year
period.
Eligible Designated Beneficiaries
The SECURE Act allows for exceptions to the 10-year rule for an eligible designated beneficiary,
which include (1) a surviving spouse, (2) the account owner’s child who has not reached the age
of majority, (3) an individual who is disabled, (4) a chronically ill individual, and (5) an
individual who is not more than 10 years younger than the account owner. These eligible
designated beneficiaries may generally take distributions over their remaining life expectancy
rather than adhere to the 10-year rule. A minor child of an account owner who is a beneficiary
may calculate distributions based on his or her remaining life expectancy until reaching the age of
majority (age 18 in most states), at which point the remaining account balance must be distributed
within 10 years.
Nondesignated or Estate Beneficiaries
If the account owner dies before the required beginning date and (1) does not designate a
beneficiary or (2) designates a trust as beneficiary, the account balance must be distributed within
five years (“the five-year rule”). Nondesignated and estate beneficiaries of a Roth IRA must take
distributions as if the account owner died before the required beginning date (i.e., within five
years). If the account owner dies after the required beginning date, the account balance must be
distributed at the same rate or faster than the original account owner was taking distributions (i.e.,
the distribution period is based on the deceased account owner’s life expectancy as of the year of
death; life expectancy is reduced by one year for each subsequent RMD). The SECURE Act did
not change distribution rules for nondesignated beneficiaries.
The distribution rules are summarized in Table 4. Distributions from inherited traditional IRAs
are included in taxable income but are not subject to the 10% early withdrawal penalty. An
individual who fails to take an RMD will generally incur a 50% excise tax of the amount that was
required to have been withdrawn.
In some cases, IRAs have beneficiaries’ distribution requirements that are more stringent than
those summarized in Table 4. For example, an IRA’s plan documents could require that a
designated spouse or designated nonspouse beneficiary distribute all assets in the IRA by the end
of the fifth year of the year following the IRA owner’s death. In such a case, the beneficiary
would not have the option to take distributions over a longer period of time. Unless the IRA’s
plan documents specify otherwise, it is possible to take distributions faster than required in Table
4
. F
or example, a beneficiary may elect to distribute all assets in a single year (i.e., a lump sum
distribution). In such a case, the entire amount distributed is included in taxable income for that
year.
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Table 4. Inherited IRA Distribution Rules

Owner Dies Before Required
Owner Dies on or After Required Beginning

Beginning Datea
Date
Treat as own, does not have to take
any distribution until the age of 72,
Treat as own, does not have to take any
but is subject to the 59½ rule, or
distribution until the age of 72, but is subject to the
Designated Spouse Keep in decedent’s name and take
59½ rule, or
Beneficiary
distributions based on own life
Keep in decedent’s name and take distributions
expectancy. Distributions do not have based on own life expectancy.
to begin until decedent would have
turned 72.
Designated
Take one or more distributions so that the account is depleted by the end of the 10th
Nonspouse
calendar year following the account owner’s year of death.
Beneficiary
Eligible Designated
Take distributions over the beneficiary’s remaining life expectancy.
Beneficiariesb
Must distribute IRA assets at least as quickly as the
Must distribute all IRA assets by the
owner had been taking them (i.e., take a yearly
Nondesignated or
end of the fifth year of the year
distribution based on the owner’s age as of
Estate Beneficiaries following the IRA owner’s death.
birthday in the year of death, reduced by one for
each year after the year of death).
Sources: 26 U.S.C. § 401(a)(9) and P.L. 116-94.
Notes: These rules apply to account owners who die after December 31, 2019. Different rules apply to account
owners who died prior to 2020. The required beginning date is the date on which distributions from the account
must begin. It is April 1 of the year following the year in which the owner of an IRA reaches the age of 72.
a. Following the initial account owner’s death, a Roth IRA beneficiary must take an RMD using the rules that
apply as if the account owner had died before the required beginning date. (Original owners of Roth IRAs
do not have to take required minimum distributions and so do not have a required beginning date.)
b. An eligible designated beneficiary includes a surviving spouse of the account owner (options for a spouse
are described separately in the table); the account owner’s child who has not reached the age of majority
(minor child distributions are calculated based on the child’s remaining life expectancy through the year that
the child reaches the age of majority, after which the 10-year rule applies); an individual who is disabled, a
chronically ill individual, and an individual who is not more than 10 years younger than the account owner.
Distributions from inherited Roth IRAs are generally free of income tax. The beneficiary may be
subject to taxes if the Roth IRA owner dies before the end of (1) the five-year period beginning
with the first taxable year for which a contribution was made to a Roth IRA or (2) the five-year
period starting with the year of a conversion from a traditional IRA to a Roth IRA. The
distributions are treated as described in the “Nonqualified Distributions” section of this report.
Retirement Savings Contribution Credit
The Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16) authorized a
nonrefundable tax credit of up to $1,000, or $2,000 if filing a joint return, for eligible individuals
who contribute to IRAs or employer-sponsored retirement plans. The Retirement Savings
Contribution Credit, also referred to as the Saver’s Credit, is in addition to the tax deduction for
contributions to traditional IRAs or other employer-sponsored pension plans. To receive the
credit, a taxpayer must be at least 18 years old, not be a full-time student, not be a dependent on
someone else’s tax return, and have AGI less than certain limits. The limits are in Table 5. For
example, individuals who make a $2,000 IRA contribution in 2022, have income of $18,000, and
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list their filing status as single would be able to reduce their 2022 tax liability by a credit up to
$1,000, or 50% of the IRA contribution amount.37
Table 5. Retirement Saving Contribution Credit Income Limits
for 2021 and 2022
Filing Status
2021 Income Limits
2022 Income Limits
Percentage Credit
Single, Married Filing Separately,
$1 to $19,750
$1 to $20,500
50%
Qualifying Widow(er)
$19,751 to $21,500
$20,501 to $22,000
20%
$21,501 to $33,000
$22,001 to $34,000
10%
more than $33,000
more than $34,000
0%
Head of Household
$1 to $29,625
$1 to $30,750
50%
$29,626 to $32,250
$30,751 to $33,000
20%
$32,251 to $49,500
$33,001 to $51,000
10%
more than $49,500
more than $51,000
0%
Married Filing Jointly
$1 to $39,500
$1 to $41,000
50%
$39,501 to $43,000
$41,001 to $44,000
20%
$43,001 to $66,000
$44,001 to $68,000
10%
more than $66,000
more than $68,000
0%
Sources: IRS Publication 590-A, at http://www.irs.gov/publications/p590a/; 2021 Limitations Adjusted as Provided in
Section 415(d), etc.
, Notice 2020-79, at https://www.irs.gov/pub/irs-drop/n-20-79.pdf; and 2022 Limitations Adjusted
as Provided in Section 415(d), etc.
, Notice 2021-61, at https://www.irs.gov/pub/irs-drop/n-21-61.pdf.
In 2019, the average credit claim was $191.38 The credit was claimed by
 6.1% of all tax returns,
 7.4% of those with an AGI of $10,000 under $25,000 (with an average claim of
$177), and
 15.5% of those with an AGI of $25,000 under $50,000 (with an average claim of
$200).39
Under current law, since individuals under certain income thresholds may not have any tax
liability or owe taxes that are less than the full amount of the credit, the benefit of a
nonrefundable credit may be limited.
Data on IRA Assets, Sources of Funds, Ownership,
and Contributions
The following tables provide data on IRA assets, sources of funds, ownership, and contributions.

37 For more information on the Saver’s Credit, see CRS In Focus IF11159, The Retirement Savings Contribution
Credit
.
38 CRS analysis of IRS, Statistics of Income, Table 3.3: All Returns: Tax Liability, Tax Credits, and Tax Payments,
2019, https://www.irs.gov/statistics/soi-tax-stats-individual-statistical-tables-by-size-of-adjusted-gross-income.
39 Ibid.
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Assets in IRAs
Table 6
contains data on the end-of-year assets in traditional and Roth IRAs from 2010 to 2020.
According to the Investment Company Institute, traditional IRAs held much more in assets than
Roth IRAs. At the end of 2020:
 total traditional IRA balances were $10.3 trillion, and
 total Roth IRA balances were $1.2 trillion.
Most inflows to traditional IRAs come from employer-sponsored pension rollovers rather than
from regular contributions.40 For example, in 2018 (the latest year for which such data are
available), within traditional IRAs, inflows from rollovers were $516.7 billion, whereas inflows
from contributions were $18.6 billion.41 In contrast, within Roth IRAs, more funds flowed from
contributions ($24.3 billion) than from rollovers ($12.5 billion) or conversions ($13.7 billion).42
Table 6. Traditional and Roth IRAs: End of Year Assets
(in billions of dollars)

2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Traditional
4,340
4,459
4,969 5,828 6,225
6,387
6,824
8,018
7,745 9,165
10,290
IRAs
Roth IRAs
355
360
439
548
600
625
697
842
846 1,040
1,210
Source: Congressional Research Service (CRS) using data from the Investment Company Institute (ICI), The
U.S. Retirement Market, Third Quarter 2021, Table 10, at https://www.ici.org/research/stats/retirement/. ICI
estimated 2019 and 2020 data. Data for year-end 2021 were not available as of the date of this report.
IRA Ownership Among U.S. Households
Table 7 and Table 8 provide data on IRA ownership among U.S. households. The data are from
CRS analysis of the 2019 Survey of Consumer Finances (SCF).43 The SCF is a triennial survey
conducted on behalf of the Board of Governors of the Federal Reserve and contains detailed
information on U.S. household finances, such as the amount and types of assets owned, the
amount and types of debt owed, and detailed demographic information on the head of the
household and spouse.44 The SCF is designed to be nationally representative of U.S. households,
of which there were 128.6 million in 2019.


40 Generally, rollovers are tax-free distributions of assets from one retirement plan that are contributed to a second
retirement plan. Regular contributions are contributions to IRAs that are made from individuals’ pre- or post-tax
income (subject to the rules of the particular type of IRA).
41 See Investment Company Institute, “The U.S. Retirement Market,” Table 11, at https://www.ici.org/research/stats/
retirement/.
42 Investment Company Institute, “The U.S. Retirement Market,” Table 12.
43 More information on the Survey of Consumer Finances (SCF) is available at http://www.federalreserve.gov/
econresdata/scf/scfindex.htm.
44 The SCF data and codebook are available at https://www.federalreserve.gov/econres/scfindex.htm. In the SCF, the
head of the household is the individual in a single household, the male in a mixed-sex couple, or the older individual in
the case of a same-sex couple. The SCF codebook indicates that “no judgment about the internal organization of the
households is implied by this organization of the data” and that the “term is euphemistic and merely reflects the
systematic way in which the data set has been organized.”
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Table 7 provides data on IRA ownership and account balances among households that owned
IRAs in 2019.
The following are some key points regarding IRA ownership:
 In 2019, 25.3% of U.S. households had an IRA. Among households that owned
IRAs, the median account balance ($70,000) was smaller than the average
account balance ($253,799), which indicates that some households likely had
very large IRA account balances.
 Households were more likely to own IRAs as the age of head of household
increased. The median and average account balances also increased as the age of
the head of the household increased.
 The percentage of households with an IRA and the median and average account
balances increased with the income of the household. Among the explanations for
this finding are that (1) households with more income are better able to save for
retirement and (2) households with higher income are more likely to participate
in a defined contribution plan and therefore have an account to roll over.45
 Married households were more likely to have an IRA than single households and
their median and average account balances were also larger. The explanations
could include the following: both spouses in a married household might have
work histories, enabling both to save for retirement or a married household might
need larger retirement savings because two people would be using the retirement
savings for living expenses in retirement.


45 See CRS Report R43439, Worker Participation in Employer-Sponsored Pensions: Data in Brief.
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Table 7. Ownership and Account Balances for IRAs in 2019
Percentage of U.S. Households

with Account
Median Account Balance
Average Account Balance
Percentage of U.S. Households with

Account
Median Account Balance
Average Account Balance
All Households
25.3%
$70,000
$253,799




Age of the Head of Household:



Younger than 35
12.0%
$7,000
$22,529
35 to 44
21.8%
$53,000
$99,142
45 to 54
28.0%
$62,000
$174,390
55 to 64
30.1%
$100,000
$316,139
65 and older
32.8%
$125,000
$387,790




2018 Household Income (in 2019 dollars) :



Less than $30,000
6.7%
$23,200
$95,306
$30,000 to $49,999
14.5%
$35,000
$88,,442
$50,000 to $74,999
21.8%
$36,000
$108,606
$75,000 to $124,999
32.1%
$54,000
$182,863
$125,000 or more
54.0%
$143,000
$406,569




Household Marital Status:



Married
32.3%
$84,000
$293,737
Single
16.4%
$47,000
$153,721
Single Female
16.5%
$44,300
$137,488
Single Male
16.3%
$50,000
$177,780
CRS-22


Percentage of U.S. Households

with Account
Median Account Balance
Average Account Balance




Race or Ethnicity of the Household Respondenta:



White, non-Hispanic
31.8%
$74,000
$271,358
Otherb
27.5%
$100,000
$233,329
Black/African-American
8.7%
$40,000
$99,828
Hispanic
7.8%
$20,000
$90,227




Education Level of the Head of Household:



Less than high school
6.1%
$25,000
$64,465
High school graduate
15.5%
$49,000
$128,207
Some college
16.7%
$50,000
$137,535
Associate’s degree
21.8%
$42,900
$138,279
Bachelor’s degree
37.6%
$84,000
$292,524
Advanced degree (master’s, professional,
49.7%
$120,000
$374,562
doctorate)
Source: CRS analysis of the 2019 Survey of Consumer Finances.
Notes: Median and average account balances are calculated using the aggregated value of all IRAs among IRA-owning households in 2019. IRA-owning households is defined
as households where the head of household or spouse, if applicable, indicates owning an IRA. Any additional individual(s) in the household with an IRA is not included in
this analysis. Analysis does not include households with Keogh accounts or employer-sponsored IRAs.
a. The SCF’s question about race or ethnicity is only asked of the designated respondent. In 79% of sampled households, the designated respondent was the head of
household.
b. “Other” includes respondents who indicated that they identified as Asian, American Indian/Alaska Native, or Native Hawaiian/Pacific Islander, or other. The SCF
combined these categories in the public dataset. The SCF allows respondents to indicate more than one race or ethnicity. CRS used the first response to analyze
data. Nearly 7% of households had a respondent who indicated more than one race or ethnicity.

CRS-23

link to page 24 link to page 25 link to page 25 Traditional and Roth Individual Retirement Accounts (IRAs): A Primer

Table 8 categorizes IRAs by the amount in the account. Among households that have IRAs,
56.4% have account balances of less than $100,000 and 6.0% have account balances of $1 million
or more.46
Table 8. Distribution of Individual Retirement Account (IRA) Balances in 2019
Percentage of All U.S.
Percentage of U.S. Households

Households
with IRAs
With an IRA
25.3%
-
Account balance


$1 to $24,999
7.2%
28.5%
$25,000 to $49,999
3.2%
12.8%
$50,000 to $99,999
3.8%
15.1%
$100,000 to $249,999
4.6%
18.4%
$250,000 to $999,999
4.9%
19.3%
$1,000,000 to $2,499,999
1.2%
4.9%
$2,500,000 or more
0.3%
1.1%
Source: CRS analysis of 2019 Survey of Consumer Finances.
Notes: Analysis does not include households with Keogh accounts. Balances represent the aggregate value of all
IRAs within a household. Numbers may not sum to total due to rounding.
Contributions to IRAs
Table 9
provides data on contributions to traditional IRAs in 2018 (the most recent year for
which data are available). About 4.4 million taxpayers contributed to traditional IRAs, with an
average contribution of $4,198. More than 50% of individuals who made contributions to their
traditional IRAs contributed the maximum amount.47 Between 5% and 6% of taxpayers age 50
and older (not in Table 9) made catch-up contributions of less than the maximum $1,000 amount.



46 The first figure is calculated by adding the percentages of U.S. households with IRAs with balances between $1 and
$99,999 (28.5% + 12.8% + 15.1% = 56.4%). The second figure is calculated by adding the percentages with balances
of $1,000,000 or higher (4.9% + 1.1% = 6.0%).
47 Not all taxpayers are eligible to deduct part or all of their traditional IRA contributions. Deductibility may factor into
a taxpayer’s choice to contribute the maximum amount. In 2017, taxpayers were not permitted to contribute to
traditional IRAs after reaching age 70½.
Congressional Research Service

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link to page 26 link to page 26 Traditional and Roth Individual Retirement Accounts (IRAs): A Primer

Table 9. Contributions to Traditional IRAs
Tax Year 2018
Percentage of
Percentage of
Taxpayers Age
Contributors
Average
50 and Older
Number of
Making the
Non-
Making Any
Contributing
Average
Maximum
Maximum
Catch-Up
Age Group
Taxpayers
Contribution
Contribution
Contribution
Contribution
All
4,434,230
$4,198
50.7%
$2,242
n/a
Under 35
554,856
$3,286
42.8%
$1,627
n/a
35 to under
50
1,299,688
$3,777
50.7%
$2,008
n/a
50 to under
65
2,086,543
$4,547
51.2%
$2,501
56.8%
65 to under
70½
492,134
$4,853
57.5%
$2,626
62.6%
Source: CRS analysis of Internal Revenue Service Statistics of Income, Accumulation and Distribution of
Individual Retirement Arrangements (IRA), Table 5: Taxpayers with Traditional Individual Retirement
Arrangement (IRA) Contributions, by Size of Contribution and Age of Taxpayer, Tax Year 2018,
https://www.irs.gov/statistics/soi-tax-stats-accumulation-and-distribution-of-individual-retirement-arrangements.
Notes: In 2018 (the latest year for which data is available), there were 144.6 million taxpayers with wage
income. In 2018, the IRA contribution limit for individuals was $5,500. Individuals age 50 and older could make
an additional $1,000 catch-up contribution. Prior to 2020, individuals could not contribute to traditional IRAs in
or after the year in which they turned 70½. Maximum contributions refer only to taxpayers who contribute the
exact amount of the limit. The maximum contribution for taxpayers whose earned income falls below the
contribution limit is lower and is not captured in this table. In addition, the contribution limit applies to all of an
individual’s IRAs, so individuals who contribute the maximum amount but split contributions between traditional
and Roth IRAs are not recorded in the data as having contributed the maximum amount.
Table 10 provides data on contributions to Roth IRAs in 2018. Over 7 million taxpayers
contributed to Roth IRAs, with an average contribution of $3,408. More than one-third of
taxpayers who contributed to Roth IRAs in 2018 contributed the maximum amount. Between 7%
and 10% of taxpayers age 50 and older (not in Table 10) made catch-up contributions of less than
the maximum $1,000 amount.


Congressional Research Service

25

Traditional and Roth Individual Retirement Accounts (IRAs): A Primer

Table 10. Contributions to Roth IRAs
Tax Year 2018
Percentage of
Percentage of
Taxpayers Age
Contributors
Average
50 and Older
Number of
Making the
Non-
Making Any
Contributing
Average
Maximum
Maximum
Catch-Up
Age Group
Taxpayers
Contribution
Contribution
Contribution
Contribution
All
7,118,775
$3,408
33.9%
$2,099
n/a
Under 35
2,209,024
$2,395
32.3%
$1,714
n/a
35 to under 50
2,287,494
$2,919
26.1%
$2,008
n/a
50 to under 65
2,120,774
$4,112
40.1%
$2,512
47.5%
65 and over
501,483
$4,744
50.9%
$2,927
61.2%
Source: CRS analysis of Internal Revenue Service Statistics of Income, Accumulation and Distribution of
Individual Retirement Arrangements (IRA), Table 6: Taxpayers with Roth Individual Retirement Arrangement
(IRA) Contributions, by Size of Contribution and Age of Taxpayer, Tax Year 2018, https://www.irs.gov/statistics/
soi-tax-stats-accumulation-and-distribution-of-individual-retirement-arrangements.
Notes: In 2018 (the latest year for which data is available), there were 144.6 million taxpayers with wage
income. In 2018, the IRA contribution limit for individuals was $5,500. Individuals age 50 and older could make
an additional $1,000 catch-up contribution. Maximum contributions refer only to taxpayers who contribute the
exact amount of the limit. The maximum contribution for taxpayers whose earned income falls below the
contribution limit is lower and is not captured in this table. In addition, the contribution limit applies to all of an
individual’s IRAs, so individuals who contribute the maximum amount but split contributions between traditional
and Roth IRAs are not recorded in the data as having contributed the maximum amount.
Congressional Research Service

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link to page 28 Traditional and Roth Individual Retirement Accounts (IRAs): A Primer

Appendix. Qualified Distributions Related to
Federally Declared Disasters and COVID-19
As part of the response to the 2005 hurricanes that affected the communities on and near the Gulf
of Mexico, Congress approved provisions that exempted individuals affected by the storms from
the 10% penalty for early IRA and qualified plan withdrawals. Congress has since approved
similar provisions in response to various federally declared disasters. Table A-1 describes all
provisions that have permitted penalty-free distributions in the case of federally declared
disasters.
In the case of Hurricane Sandy in 2012, no legislation was passed that would have exempted
individuals in areas affected by this natural disaster from the 10% penalty for early withdrawals
from IRAs or defined contribution retirement plans.48 Exemptions from the 10% penalty require
congressional authorization. The IRS eased requirements for hardship distributions in areas
affected by Hurricane Sandy in 2012. Among the relief offered by the IRS in Announcement
2012-44, “Plan administrators may rely upon representations from the employee or former
employee as to the need for and amount of a hardship distribution” rather than require
documentation from the employee of the need.49 In addition, in the announcement, the IRS
suspended the provision that required an individual to suspend contributions to 401(k) and 403(b)
plans for the six months following a hardship distribution.50


48 H.R. 2137, the Hurricane Sandy Tax Relief Act of 2013, introduced by Representative Bill Pascrell on May 23,
2013, would have both provided an exemption to the 10% early withdrawal penalty for retirement account distributions
and eased requirements for loans from defined contribution pensions for those affected by Hurricane Sandy in 2012.
49 See 26 C.F.R. §1.401(k)-1.
50 The Bipartisan Budget Act of 2018 (P.L. 115-123) directed the IRS to eliminate the six-month prohibition on
contribution following hardship withdrawals. Final regulations specified that all plans must eliminate the six-month
prohibition starting January 1, 2020.
Congressional Research Service

27


Table A-1. Penalty-Free Distributions from Retirement Plans in Response to Federally Declared Disasters
Federally Declared
Public Law
Disaster(s)
Provision Description
Date Withdrawals Could Be Made
The Gulf Opportunity Zone
Hurricanes Katrina,

Qualified individuals could take penalty-free

On or after 8/25/2005 and before 1/01/2007, to an
Act of 2005 (P.L. 109-135)
Rita, or Wilma
distributions up to $100,000 from their
individual whose principal place of abode on
retirement plans, including traditional and Roth
8/28/2005 was located in the Hurricane Katrina
IRAs
disaster area and who sustained an economic loss

by reason of Hurricane Katrina; or

Distributions were to be reported as income
either in the year received or over three years

On or after 9/23/2005 and before 1/01/2007, to an

individual whose principal place of abode on

Part or all of the distribution could be repaid
within three years of receiving the distributiona
9/23/2005 was located in the Hurricane Rita
disaster area and who sustained an economic loss

Qualified individuals who received hardship
by reason of Hurricane Rita; or
distributions or penalty-free IRA distributions
within specified dates for the purposes of

On or after 10/23/2005 and before 1/01/2007, to an
constructing or purchasing a principal
individual whose principal place of abode on
residence but who were unable to do so due
10/23/2005 was located in the Hurricane Wilma
to Hurricanes Katrina, Rita, or Wilma, to
disaster area and who sustained an economic loss
recontribute the amount of the distribution to
by reason of Hurricane Wilma
qualified plans or IRAs
The Heartland Disaster Tax
Severe storms,

Qualified individuals could take penalty-free

On or after the applicable disaster date (the date
Relief Act of 2008 (passed as tornados, and flooding
distributions up to $100,000 from their
on which the President declared an area to be a
Division C of P.L. 110-343)
in certain Midwestern
retirement plans, including traditional and Roth
major disaster area on or after 5/20/2008 and
states in 2008
IRAs
before 1/01/2010 [limited to Arkansas, Illinois,

Indiana, Iowa, Kansas, Michigan, Minnesota,

Distributions were to be reported as income
either in the year received or over three years
Missouri, Nebraska, and Wisconsin]) and before
1/01/2010, to an individual whose principal place of

Part or all of the distribution could be repaid
abode on the declared Midwestern disaster is
within three years of receiving the distributiona
located in the applicable disaster area and who has

Qualified individuals who received hardship
sustained an economic loss by reason of the
distributions or penalty-free IRA distributions
declared Midwestern disaster
within specified dates for the purposes of
constructing or purchasing a principal
residence but who were unable to do so due
to Midwestern disasters, to recontribute the
amount of the distribution to qualified plans or
IRAs
CRS-28


Federally Declared
Public Law
Disaster(s)
Provision Description
Date Withdrawals Could Be Made
The Disaster Tax Relief and
Hurricanes Harvey,

Qualified individuals could take penalty-free

On or after 08/23/2017 and before 01/01/2019, to
Airport and Airway
Irma, or Maria
distributions up to $100,000 from their
an individual whose principal place of abode on
Extension Act of 2017 (P.L.
retirement plans, including traditional and Roth
08/23/2017, was located in the Hurricane Harvey
115-63)
IRAs
disaster area and who sustained an economic loss

by reason of Hurricane Harvey; or

Distributions were to be reported as income
either in the year received or over three years

On or after 09/04/2017 and before 01/01/2019, to

an individual whose principal place of abode on

Part or all of the distribution could be repaid
within three years of receiving the distributiona
09/04/2017 was located in the Hurricane Irma
disaster area and who sustained an economic loss

Qualified individuals who received hardship
by reason of Hurricane Irma; or
distributions or penalty-free IRA distributions
within specified dates for the purposes of

On or after 09/16/2017 and before 01/01/2019, to
constructing or purchasing a principal
an individual whose principal place of abode on
residence but who were unable to do so due
09/16/2017 was located in the Hurricane Maria
to Hurricanes Harvey, Irma, or Maria, to
disaster area and who sustained an economic loss
recontribute the amount of the distribution to
by reason of Hurricane Maria
a qualified plan or IRA
The Bipartisan Budget Act of California wildfires in

Qualified individuals could take penalty-free

On or after 10/08/2017, and before 01/01/2019, to
2018 (P.L. 115-123)
2017
distributions up to $100,000 from their
an individual whose principal place of abode during
retirement plans, including traditional and Roth
any portion of the period from October 8, 2017, to
IRAs
December 31, 2017, is located in the California

wildfire disaster area and who has sustained an

Distributions were to be reported as income
either in the year received or over three years
economic loss by reason of the wildfires to which
the declaration of such area relates

Part or all of the distribution could be repaid
within three years of receiving the distributiona

Qualified individuals who received hardship
distributions or penalty-free IRA distributions
within specified dates for the purposes of
constructing or purchasing a principal
residence but who were unable to do so due
to the California wildfires, to recontribute the
amount of the distribution to qualified plans or
IRAs
CRS-29


Federally Declared
Public Law
Disaster(s)
Provision Description
Date Withdrawals Could Be Made
Division Q of the Further
Variousb

Qualified individuals could take penalty-free
On or after the first day of the incident period of a
Consolidated
distributions up to $100,000 from their
qualified disaster (declared during the period beginning
Appropriations Act, 2020
retirement plans, including traditional and Roth on 01/01/2018 and ending on the date which is 60 days
(P.L. 116-94)
IRAs
after the date of the enactment of P.L. 116-94) and

before the date which was 180 days after the of

Distributions were to be reported as income
either in the year received or over three years
enactment of P.L. 116-94 and whose principal place of
abode during the incident period is located in the

Part or all of the distribution could be repaid
qualified disaster area and who has sustained an
within three years of receiving the distributiona economic loss by reason of the disaster to which the

Qualified individuals who received hardship
declaration of such area relates
distributions or penalty-free IRA distributions
within specified dates for the purposes of
constructing or purchasing a principal
residence but who were unable to do so due
to the specified disasters, to recontribute the
amount of the distribution to qualified plans or
IRAs
CRS-30


Federally Declared
Public Law
Disaster(s)
Provision Description
Date Withdrawals Could Be Made
The Coronavirus Aid, Relief, Coronavirus Disease

Qualified individuals could take penalty-free
From 01/01/2020, and before 12/31/2020, to individuals
and Economic Security Act
2019 (COVID-19)
distributions up to $100,000 from their
(1) who tested positive for COVID-19 or those with a
(CARES Act; P.L. 116-136)
retirement plans, including traditional and Roth spouse or dependent who tested positive for COVID-
IRAs
19; (2) facing financial difficulties due to being

quarantined, furloughed, laid off, or unable to work due

Distributions were to be reported as income
either in the year received or over three years
to lack of child care or reduced work hours as a result
of COVID-19; (3) who own or operate a business that

Part or all of the distribution could be repaid
closed or reduced hours as a result of COVID-19; or (4)
within three years of receiving the distributiona facing other factors as determined by the Secretary of
the Treasury. The IRS outlined additional factors that
made an individual eligible for coronavirus-related
distributions or plan loan relief. The additional qualifying
factors included:

the individual having a reduction in pay (or self-
employment income), a job offer rescinded, or
start date for a job delayed due to COVID-19;

the individual’s spouse or household member
being quarantined, furloughed, or laid off;
having work hours reduced due to COVID-19;
being unable to work due to lack of child care
due to COVID-19; having a reduction in pay
(or self-employment income), a job offer
rescinded, or start date for a job delayed due
to COVID-19; or

the individual’s spouse or household member
owning or operating a business that closed or
reduced hours due to COVID-19.
CRS-31


Federally Declared
Public Law
Disaster(s)
Provision Description
Date Withdrawals Could Be Made
Title III of Division EE (the
Variousc

Qualified individuals could take penalty-free

On or after the first day of the incident period of a
Taxpayer Certainty and
distributions up to $100,000 from their
qualified disaster (for disasters declared from
Disaster Tax Relief Act of
retirement plans, including traditional and Roth
01/01/2020 through 60 days after the enactment of
2020) of the Consolidated
IRAs
P.L. 116-260) and before the date which is 180 days
Appropriations Act, 2021

after the date of enactment of the act and to an

Distributions were to be reported as income
(P.L. 116-260)
either in the year received or over three years
individual whose principal place of abode during the
incident period is located in the qualified disaster

Part or all of the distribution could be repaid
area and who has sustained an economic loss by
within three years of receiving the distributiona
reason of the disaster to which the declaration of

Qualified individuals who received hardship
such area relates
distributions or penalty-free IRA distributions
within specified dates for the purposes of
constructing or purchasing a principal
residence but who were unable to do so due
to the specified disasters could recontribute
the amount of the distribution to a qualified
plan or IRA
Source: Congressional Research Service (CRS).
a. Amounts repaid were treated as a trustee-to-trustee rollover (as if they were made directly from one financial institution to another).
b. Federally declared disasters (including disaster declaration dates and incident periods) can be searched for at https://www.fema.gov/disaster/declarations.
c. P.L. 116-260 specified that COVID-19 was not included as a disaster for the purposes of the provision.

CRS-32

Traditional and Roth Individual Retirement Accounts (IRAs): A Primer


Author Information

Elizabeth A. Myers

Analyst in Income Security


Acknowledgments
John Topoleski was the original author of this report.

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
material from a third party, you may need to obtain the permission of the copyright holder if you wish to
copy or otherwise use copyrighted material.

Congressional Research Service
RL34397 · VERSION 34 · UPDATED
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