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1 1 (August 12, 2021)

handle is hein.crs/goveehx0001 and id is 1 raw text is: Congressional SaResearch Service Data on Contributions to Individual Retirement Accounts (IRAs) August 12, 2021 Individuals can save for retirement in two types of tax-advantaged accounts: defined contribution (DC) and individual retirement accounts (IRAs). DC plans are employer-sponsored retirement plans in which contributions from a worker, the employer, or both are placed in an individual account. Individuals with wage income can also contribute to IRAs, which are privately held retirement savings accounts. Contributions-and any investment earnings-in DC accounts and IRAs can be used as a source of income in retirement. Both DC accounts and IRAs may accept rollovers. Rollovers-transfers of funds from one retirement account to another-preserve the tax advantages of retirement savings. This Insight provides Internal Revenue Service (IRS) data on contributions to IRAs in 2018. Congress has an interest in contribution data because (1) the tax expenditures for retirement plans (estimated to be $23.8 billion for IRAs and $153.6 billion for DC plans in FY2020) are one of the largest categories of revenue losses attributable to provisions in the tax code, and (2) recent legislation has included provisions that would modify contribution limits for certain individuals. CRS Insight IN11721, Data on Retirement Contributions to Defined Contribution (DC) Plans provides similar data for DC accounts. The tax benefits of IRAs depend on whether the account is a traditional or a Roth account. Contributions to traditional IRAs may be tax deductible in the year in which they are made based on income limits and depending on whether the account holder or spouse has a pension plan at his or her work. Investment earnings in traditional IRAs accumulate on a tax-deferred basis. Withdrawals from traditional IRAs (except for amounts attributed to non-deductible contributions) are included in taxable income when received. Contributions to Roth IRAs are not tax deductible in the year in which they are made. Investment earnings accumulate on a tax-free basis: Qualified distributions from a Roth account (those taken by an individual who has held the account for five years and made after death, on account of disability, or on or after attainment of age 5912) are not included in taxable income. Individuals' contributions to IRAs are subject to annual contribution limits. In 2018 (the most recent year for which contribution data from the IRS is available), an individual could contribute up to the lesser of (1) his or her wage income for the year or (2) $5,500 to his or her IRA. Individuals age 50 and older could make an additional $1,000 catch-up contribution to their IRAs. The IRAcontribution limit is adjusted annually for inflation, while the $1,000 IRA catch-up contribution is not. Congressional Research Service https://crsreports.congress.gov IN11722 CRS INSIGHT Prepared for Membersand Committeesof Congress

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