IRA – Frequently Asked Questions

An Individual Retirement Account (IRA) is designed to help you save for retirement and take advantage of tax benefits. There are two main types of IRAs: Traditional and Roth IRAs.

The primary difference between a Traditional IRA and Roth IRA is the type of tax benefit each offers. Roth IRAs offer tax-free growth potential. Investment earnings are distributed tax-free, if a five-year waiting period has been met and you are at least age 59½, or you are disabled, or using the qualified first-time homebuyer exception ($10,000 lifetime maximum), or the payment is made to your beneficiary after your death. Since contributions to a Roth IRA are made with after-tax dollars, there is no tax deduction regardless of income. Traditional IRAs offer tax-deferred growth potential. You pay no taxes on any investment earnings until you withdraw or “distribute” the money from your account, presumably in retirement. Additionally, depending on your income, your contribution may be tax deductible. Deferring taxes allows for a potentially greater accumulation of wealth. For more information about these IRAs, including details about eligibility, visit the Traditional vs. Roth section of our IRA Center.

The first step in opening an IRA is to select the option that fits your individual investment style. It’s important to know that application instructions vary based on the type of investing style you choose. For additional details on brokerage options, you can also call us at 1-877-493-4727.

Your Modified Adjusted Gross Income (MAGI) is an income tax term. It is your adjusted gross income (AGI) with certain deductions and exclusions added back. It's used to determine whether or not you’re allowed certain tax benefits like being able to deduct your Traditional IRA contribution or qualify to make a Roth IRA contribution. Need more information? Review IRS information on IRAs, IRS Publication 590-A (PDF), or contact your tax advisor.

You can choose from a wide range of investments offered through Wells Fargo Advisors, including stocks, bonds, Exchange-Traded Funds (ETFs), and mutual funds. And you can invest your way — make your own investment decisions, receive investment guidance, or work with professional Financial Advisors.

Eligible individuals under age 50 can contribute up to $7,000 in 2024. Eligible individuals age 50 or older, within a particular tax year, can make an additional catch-up contribution of $1,000. The total contribution to all of your Traditional and Roth IRAs cannot be more than the annual maximum for your age or 100% of earned income, whichever is less.

A catch-up contribution is an elective deferral to a qualified employer sponsored retirement plan (QRP), such as a 401(k), 403(b), or governmental 457(b), that is made by a participant age 50 or older that exceeds a statutory limit, a plan-imposed limit, or the actual deferral percentage test limit for highly compensated employees. Visit irs.gov for more information.

Eligible individuals age 50 or older, within a particular tax year, can make an additional IRA catch-up contribution of $1,000.

Yes, if you meet the eligibility requirements for contributing to a Traditional IRA and Roth IRA. The total contribution to all of your Traditional and Roth IRAs cannot be more than the annual maximum for your age or 100% of earned income, whichever is less. For example, in 2024, the total amount you can contribute to both a Traditional IRA and a Roth IRA combined cannot exceed $7,000 ($8,000 if age 50 or older). In 2024, the total amount you can contribute to both a Traditional IRA and a Roth IRA combined cannot exceed $7,000 ($8,000 if age 50 or older).

Yes, you can open and fund a Traditional or a Roth IRA even if you already contribute to a workplace retirement plan (WRP) such as a 401(k), 403(b), SEP, and SIMPLE IRA, helping you save more than you could in your plan at work alone. You may want to discuss this option with your tax advisor, however, since participation in a WRP may impact deductibility in a Traditional IRA.

Taxable distributions from Traditional and Roth IRAs before age 59½ may be subject to an IRS 10% additional tax for early or pre-59½ distributions (10% additional tax). The exceptions to the 10% additional tax are for age 59½, death, disability, eligible medical expenses, certain unemployed individuals' health insurance premiums, qualified first homebuyer (lifetime maximum of $10,000), qualified higher education expenses, substantially equal periodic payments (SEPP), Roth conversions, qualified reservist distribution, qualified disaster distribution, birth or adoption expenses (up to $5,000), or IRS levy.

No. Loans are not permitted from IRAs.

You must call us at the numbers indicated below to request a distribution from your IRA — be sure to have your account number(s) handy.

Wells Fargo Bank IRA – you can call the Best IRA service team at 1-800-237-8472 to complete reinvestment of a mature CD, Roth IRA conversions, and transfers due to divorce. For all other IRA distributions, please visit a Wells Fargo branch.

For a Wells Fargo Advisors IRA - call us at the phone number listed on your IRA statement. To access your statement, sign on to Wells Fargo Online^® and select Statements and Documents in the More menu.

Consolidating your IRAs offers many potential benefits, including one monthly statement, required minimum distribution (RMD) simplification, potentially fewer fees, and ease in managing your investment strategy. To explore whether this approach is a good choice for you, or to learn more about how to transfer or consolidate IRA assets, call us at 1-877-493-4727 or request a retirement consultation.

A Roth conversion involves a transfer of assets from your Traditional IRA or qualified employer-sponsored retirement plan (QRP), such as a 401(k), 403(b) or governmental 457(b), into a Roth IRA. Converting before-tax money to a Roth IRA is a taxable event in the year of the conversion; any after-tax amount converted is not included in gross income. It is important to remember that you must have a triggering event, such as separation of service, to be eligible to make distributions from your QRP. Learn more about converting to a Roth IRA.

A Savings Incentive Match Plan for Employees (SIMPLE) IRA allows employees and employers to contribute to an IRA based plan that is set up and designated as a SIMPLE IRA for employees' benefit. Under a SIMPLE IRA, employees can elect to defer a portion of their pay known as salary deferral up to $16,000 for 2024 plus a $3,500 catch-up if age 50 or older and the employer will make either a matching or non-elective contribution. All contributions, both employee and employer, must be deposited into a SIMPLE IRA for each employee. Distributions taken before age 59½ and within 2 years of the first deposit to the SIMPLE IRA are subject to a 25%, rather than a 10%, early distribution tax.

A Simplified Employee Pension (SEP) plan can provide a significant source of income at retirement by allowing employers to set aside money in retirement accounts for themselves and their employees. Under a SEP, an employer contributes directly to a SEP IRA for all eligible employees (including themselves). A SEP allows for a contribution of up to 25% of each employee’s compensation or $69,000, whichever is less, for 2024. The employee can also make their Traditional IRA contribution to their SEP IRA.

An Inherited IRA allows beneficiaries a way to keep the funds growing tax-advantaged in an IRA while taking distributions. The account titling will always refer to the deceased IRA owner with you listed as the beneficiary. Since you aren’t the owner, you may not make contributions or 60-day rollover deposits to this account. Your beneficiary category will determine your options for distributing the money. For more information, please read IRS Publication 590-B (PDF).

Your beneficiary designations generally determine who will inherit your IRA and supersede instructions in your will or trust. To update your beneficiaries, have your account number available and call us at the phone number listed on your IRA statement (to access your statement simply sign on to Wells Fargo Online and select Statements and Documents in the More menu).

While it is recommended that you review and update your beneficiaries listed on your retirement accounts, at any life event such as a birth of a child or grandchild, death of a beneficiary, divorce, or marriage — that doesn’t always happen. Only if your named beneficiaries have disclaimed, or died prior to you, the IRA owner, and a per stirpes designation was not elected, or there is no valid beneficiary form on file, will the default provisions be used.

The default beneficiaries on a Wells Fargo IRA are:

• First, a surviving spouse
• Second, surviving children (as defined under state law)
• Third, your estate

Having Estate listed as your IRA beneficiary may have impacts that could negatively affect your heirs as well as your overall Estate plan. These impacts may include the following:

• Subject to probate - IRAs, which should be a non-probate asset, will become subject to probate and the related legal complications.
• Limited distribution options - When your Estate inherits your IRA, the distribution options available are limited. If you die before your required beginning date (RBD), generally April 1 following the year you reach age 73, the IRA will be distributed within five years. If you die after your RBD, required minimum distributions (RMDs) for your beneficiaries are based on your remaining single life expectancy.
• Tax implications - Distributions from the IRA to the Estate may be taxed at the Estate federal income tax rate, which can be significantly higher than the tax rates to individual taxpayers.