Individual Retirement Accounts (IRAs) Vocabulary

Vocabulary flashcards covering Traditional IRAs, Roth IRAs, contribution limits, tax deductibility status, divorce transfer rules, and inherited IRA beneficiary types based on the lecture notes.

Traditional IRA

A non-qualified retirement plan that allows investors to save for retirement outside of employer-sponsored plans, where contributions are typically tax-deductible against earned income and distributions are fully taxable as ordinary income.

IRA Contribution Limit (2026)

The lesser of $7,500$ or the amount of reportable earned income during the year.

IRA Tax-Filing Deadline Rule

The provision permitting investors to make IRA contributions toward a specific year's limit up until the tax-filing deadline of the following year (typically April 15th).

Spousal IRA Contribution

A contribution made by a working spouse into a non-working spouse's separate IRA on their behalf.

Catch-up Provision

An additional allowed IRA contribution of $1,100$ per year for investors age 50 or older, raising their total 2026 contribution limit to $8,600$.

Covered by a Qualified Workplace Plan

A status indicating that an investor has access to a qualified retirement plan, such as a 401(k), through their employer, which impacts the deductibility of their traditional IRA contributions based on income.

Traditional IRA Phaseout Range (Single, 2026)

An income range between $81,000$ and $91,000$ for single taxpayers covered by a workplace plan, within which traditional IRA contributions are only partially deductible.

Traditional IRA Phaseout Range (Married Filing Jointly, 2026)

An income range between $129,000$ and $149,000$ for married taxpayers filing jointly covered by a workplace plan, within which traditional IRA contributions are only partially deductible.

Basis (Traditional IRA)

The total amount of non-deductible contributions made to a traditional IRA, which is returned to the investor tax-free upon withdrawal.

Rollover

The movement of retirement assets from one retirement plan to another without triggering a tax-reportable event.

Prohibited IRA Trading Activities

Investment practices not allowed within IRAs, specifically short sales, margin trading, and selling uncovered (naked) options.

Roth IRA

A retirement account created in the 1990s and named after Senator William Roth that is funded with after-tax (non-deductible) contributions, grows tax-sheltered, and allows tax-free withdrawals in retirement if requirements are met.

Shared IRA Contribution Limit

The rule establishing that the maximum annual contribution limit ($7,500$ in 2026, or $8,600$ if age 50 or older) applies across both Traditional and Roth IRAs combined.

Roth IRA Phaseout Range (Single, 2026)

An income range between $153,000$ and $168,000$ for single taxpayers, above which no Roth IRA contributions can be made.

Roth IRA Phaseout Range (Married Filing Jointly, 2026)

An income range between $242,000$ and $252,000$ for married taxpayers filing jointly, above which no Roth IRA contributions can be made.

Qualified Roth IRA Distribution Requirements

The criteria required to avoid taxes on Roth IRA withdrawals: the account owner must be at least $59\frac{1}{2}$ years old and the account must be open for at least five years.

Five-Year Aging Period

The requirement that a Roth IRA must be open for at least five years—starting on the first day of the tax year of the first contribution—before earnings can be withdrawn tax-free.

Required Minimum Distributions (RMDs)

Mandatory distributions required by the IRS from most retirement plans starting at age 73, from which Roth IRAs and Roth 401(k)s are exempt.

Roth 401(k)

A qualified workplace plan governed by ERISA that combines after-tax contributions and tax-free qualified withdrawals with workplace retirement account benefits.

Qualified Domestic Relations Order (QDRO)

A court order complying with ERISA used to split qualified retirement plan assets during a divorce.

Transfer Incident to Divorce

A legal process used to divide non-qualified retirement plans, such as traditional and Roth IRAs, during a divorce without needing to comply with ERISA.

Spousal Beneficiary Options

Choices available to a surviving spouse inheriting an IRA, including claiming the IRA as their own or claiming the assets into an inherited IRA.

Eligible Designated Beneficiary

A non-spouse IRA beneficiary who is a minor child of the deceased, permanently disabled, chronically ill, or not more than 10 years younger than the decedent, allowing them to take annual RMDs over their lifetime.

Designated Beneficiary

A non-spouse IRA beneficiary who does not qualify as an eligible designated beneficiary and must fully distribute all inherited IRA assets within 10 years.