This is a guest post from Robert Brokamp of The Motley Fool. Robert is a Certified Financial Planner and the adviser for The Motley Fool’s Rule Your Retirement service. Robert contributes one new article to Get Rich Slowly every two weeks, and photocopies his face and other body parts.

I don’t know you personally (yet), but my guess is that you own an IRA or employer-sponsored retirement account such as a 401(k) or 403(b). Such accounts are where the majority of Americans hold their longterm savings. However, like anything governed by the Congress and the IRS, there are plenty of rules, exceptions, and quirks. Here are some lesser-known facts about retirement accounts.

1. The deadline for 2011 IRA contributions is April 17, 2012.
It’s too late to make a 2011 contribution to your 401(k), but you have until the tax-filing deadline to contribute to an IRA. That’s usually April 15, but it’s been extended to April 17 this year since April 15 falls on a Sunday, and April 16 is Emancipation Day in the District of Columbia (as well as the birthday of Peter Billingsley, who played Ralphie in A Christmas Story, but I don’t think the IRS cares about that as much).

2. Contribution limits are up for 401(k)s, not for IRAs.
The most you can contribute to an IRA in 2012 is the same as the limits for 2011: $5,000, with an additional $1,000 for those age 50 or older. However, the amount you can contribute to a 401(k) has been increased to $17,000, with an extra $5,500 for the 50-and-older crowd. So if you maxed out your 401(k) in 2011 and want to contribute the max this year, you’ll need to increase your paycheck withholding.

3. If you have a job, or are married to someone who does, you can contribute to an IRA.
There are lots of rules about who can contribute to which kind of IRA, how much can be contributed, and the tax treatment of those contributions. Spelling that out would take a whole other post. But here’s the crucial starting point: You must have earned income — i.e., get paid to do a job — to be able to contribute to an IRA. The only exception is a spouse who is married to someone with a job, who would then be eligible for the so-called “spousal IRA.” This also means that a kid who is earning money can contribute to an IRA (though it’s a bit more complicated, since it might take more work to document something like babysitting income).

However, some people think that if they’re not eligible for a Roth IRA of deductible traditional IRA, then they can’t contribute to an IRA at all. Not true. You can still contribute to a non-deductible traditional IRA, which will grow tax-deferred — i.e., you don’t pay taxes on any investment earnings until you make withdrawals. Just make sure to document how much you contributed because that money will come out tax-free.

(For those who want more information about income and eligibility numbers for IRAs, here are some of the IRA guidelines for 2011, and here are some of the guidelines for 2012.)

4. Improve your investment choices.
The typical employer-sponsored retirement account offers so-so investment choices and charges too much for the privilege. Fortunately, you may not be stuck with those lousy and overpriced investments. Here are some options:

  • If you no longer work at the company, transfer the money to a low-cost IRA.
  • Many retirement plans offer a brokerage window, which allows employees to buy individual stocks, exchange-traded funds, and other mutual funds.
  • Some plans allow for in-service distributions, which allow employees to transfer money to an IRA while still working for the company.

Also, your company may have a benefits committee, or at least a group of folks who occasionally think about the retirement plan (typically, the human resources folks and perhaps the CFO). You can agitate for better investment options, a brokerage option, or even a completely different plan. We went through this process a few years ago at The Motley Fool, and believe me, it’s worth it.

5. You can pay annual IRA fees with non-IRA money.
Many IRA providers charge an annual account fee, which is automatically taken from your account assets. But you can instead send a check to the custodian and leave more money in the IRA to grow through the years. (Contact your provider for details.) Unfortunately, you can’t use non-IRA money to pay other costs, such as commissions and mutual fund expenses.

6. Get the money before age 59 1/2.
Because Uncle Sam wants us to save for retirement, IRAs and employer-sponsored accounts come with several tax advantages. To encourage us to actually use this money for retirement, Uncle Sam will make you pay a 10% penalty if you tap the account before age 59 ½. While leaving the money alone until you retire is definitely the smartest strategy, the truth is that sometimes people need the money before they reach their 60s. Here are several exceptions to the 10% penalty (though, in many cases, the withdrawals will still be taxed).

  • Contributions to a Roth IRA (not earnings) can be withdrawn any time, tax- and penalty-free. However, early distributions from a Roth 401(k) are a proportional mix of contributions and earnings, so some of the withdrawal may be taxed and penalized.
  • You may be able to make penalty-free withdrawals from your last employer’s plan if you retire at age 55 or older.
  • Under rule 72(t), you can make substantially equal periodic payments (SEPPs) at any age by agreeing to take out a certain amount each year until you turn 59 1/2 or for five years, whichever is longer.
  • IRA assets used to pay for qualified higher-education expenses — such as tuition, fees, books, and room and board — are exempt from the 10% penalty. Note that this applies to IRAs only, and not employer-sponsored accounts such as 401(k)s and 403(b)s. Also, these distributions are counted as income on the tax return, which could affect financial aid eligibility in the subsequent year.
  • You can use your IRA to help put a roof over your head, as long as you’re considered a first-time buyer, which, according to the IRS, includes anyone who hasn’t owned a home in the past two years. There is a $10,000 lifetime limit on what can be withdrawn penalty-free, but that limit is applied per person, so married couples can withdraw up to $20,000.

You also might be able to escape the 10% penalty if withdrawals are used for un-reimbursed medical expenses; health insurance if you’re unemployed; or living expenses if you’re disabled. The rules around these exemptions are more complex, though, so do plenty of research first.

7. You can invest in “alternative investments,” but tread carefully.
Retirement accounts are not limited to stocks, bonds, and mutual funds. You may be able to use your retirement savings to invest in options, real estate, small businesses, and collectibles; I’ve even met someone who works for a 401(k) provider who claims they have a client who has invested in Babe Ruth memorabilia. The trick is to find a custodian that will allow such investments. You’ll have to go beyond the usual brokerages and mutual fund companies and find a company (often a bank) that specializes in such arrangements, which are often referred to as “self-directed IRAs.” That said, many promoters of these arrangements turn out to be frauds. Using your retirement-account money for such arrangements is much more complicated, and risky. Caveat emptor and all that.

8. Use the Roth as an estate-planning tool.
Let’s say you’re still working, but you’ve already saved enough for retirement and would like to help your kids, grandkids, or favorite Get Rich Slowly contributor. One option is to contribute to a Roth IRA and name your relative(s) as beneficiaries. When you retire from this world to the next, your heirs will receive that money income tax-free (although it may be subject to estate taxes).

There are a few reasons a Roth IRA is better than a traditional IRA for this purpose. You can’t contribute to a traditional IRA past age 70, even if you’re still working. In fact, at that point, you must begin taking money out, which is known as a required minimum distribution (RMD). The scenario is a bit different with a Roth; there’s no age limit and no RMDs. Plus, heirs must pay income taxes on inherited traditional IRAs.

9. Protect assets with retirement accounts.
The money in your employer-sponsored retirement account most likely can’t be lost to bankruptcies or lawsuits. In most cases, the same goes for IRAs, up to $1 million.

10. Inherited retirement accounts can get very complicated.
This is another one of those topics that would take several hundred words to explain, and you’d never make it to the end because you’d pass out from boredom and ennui (if you haven’t already). But there are lots of quirks about inherited retirement accounts. Just one example: If you inherit an IRA — even a Roth IRA — you may be required to take annual minimum distributions, even if you’re seven years old (and good for you for reading this post at such a young age).

If you inherit a retirement account, it might be smart to see a qualified professional to get guidance — perhaps from an accountant or financial planner who works by the hour (such as the folks at the Garrett Planning Network). You can also find good information at IRAHelp.com and Fairmark.com.

11. Have Uncle Sam fund your IRA.
Getting a tax refund? You can instruct the IRS to send it directly to your IRA.