A Traditional IRA is any IRA that is not a Roth, SEP, SIMPLE or Coverdell ESA. Any individual who has taxable compensation or self-employment income in a particular year, and will not reach age 70½ by the end of that year, may open and fund a Traditional IRA. It must be established at an institution that has received IRS approval to offer IRAs. These include banks and credit unions, brokerages, life insurance and trust companies.
Owners of Traditional IRAs must begin to take distributions not later than April 1 of the calendar year following the year in which they reach age 70½. Under Uniform Unclaimed Property guidelines, abandonment of a Traditional IRA may be presumed (a) after age 70½ if no distribution has been made; (b) if distributions have previously been made and then stopped, or (c) if a distribution check is not cashed.
Important Update: Setting Every Community Up for Retirement Enhancement — SECURE Act of 2019 Section 114 of the SECURE Act updates the age of Required Minimum Distribution (RMD) for IRAs under the Internal Revenue Code from 70½ to 72. Under the new statute, an IRA owner is not required to begin taking Required Minimum Distributions from until April 1 following the year in which the owner reaches 72.
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Roth IRA
Roth IRA contributions are not deductible from taxable income at the time they are made. With Roth IRAs you don’t pay income tax on gains, interest or dividends when you withdraw the money if you are at least age 59½ and the account has been open for five years or longer. Tax-free withdrawals are also allowed for first-home purchase ($10,000 lifetime cap), and upon death or disability; but the five-year requirement still applies.
You can make contributions to a Roth at any age if you have taxable compensation, and the Traditional IRA requirement that you start making withdrawals at age 70½ does not apply. Roth IRAs may be reported and remitted as unclaimed property at some number of years determined by each individual state – 3 years is typical – after the election date (age 59½) or earlier, if there have been uncashed distribution checks and/or returned statements.