Compare Traditional and Roth individual retirement
accounts
IRAs offer the potential for tax-advantaged growth of
retirement savings.
The two types of IRAs for individual investors are Roth and Traditional.
These IRAs have some important differences, especially
when it comes to
income limits and tax benefits. In a Roth
IRA, you make contributions on
an after-tax basis, and
any earnings grow free of federal taxes, which
means you
don't get a tax deduction now, but you won't need to pay
taxes on the earnings later.
A Traditional IRA's key advantage is tax deferral, while
possible deductibility
means the potential for tax savings
today. Any earnings you make may
grow tax deferred until
retirement. You may be able to deduct your
contributions
from your current taxes.
The IRA plan comparison chart below gives summary information
only.
Please review the details for each type of account
for more information.
You may want to consult your tax
professional.
| Account |
|
Traditional
IRA |
|
Roth-IRA |
| Apply |
|
Download
application |
|
Download
application |
| Minimum to open |
|
$1,000 |
|
$1,000 |
| Eligibility |
|
Under age 70-½ |
|
Any |
| |
|
--
A non-working or uncovered spouse can open this type of a Traditional
or a Roth IRA if the couple files a joint federal income tax
return and if combined contributions do not exceed $10,000 ($5,000
each) or $12,000 ($6,000 each) if age 50 or older or combined
compensation, whichever is less, for 2008. |
| Contribution
Deadlines |
|
April 15, 2009 for the 2008 tax year |
 |
| Tax
Advantages |
|
| Contributions |
|
Tax-deductible subject to retirement
plan participation status and AGI (Adjusted Gross Income) limits.
Spouses not covered by a workplace plan have a higher deductible
limit.* |
|
Not tax-deductible. |
| Earnings |
|
Tax-deferred
(taxed when you begin withdrawing). |
|
Tax-free (subject
to certain limitations). |
| Withdrawals |
|
Taxable. |
|
Tax-deductible (subject to certain
limitations). |
|
| Contributions |
|
| Yearly amount |
|
For 2008,
$5,000 or 100% of employment compensation, whichever is less.
You may contribute simultaneously to a Traditional IRA and a
Roth IRA (subject to eligibility) as long as the total contributed
to all (Traditional or Roth) IRAs totals no more than $4,000
for tax year 2008 ($5,000 age 50 and older). |
| Catch-up Contributions |
|
Individuals
age 50 or older (in the calendar year of their contribution) can
contribute an additional $1,000 for 2008, for a total
of $6,000. |
| Age |
|
Under 70-½. |
|
Any. |
| Income |
|
No income limits. |
|
For single
filers - up to $10,000 for 2008 ($101,000-$114,500 in 2008 for a partial contribution).
For joint filers - up to $159,000
for 2008 ($159,000-$168,000
in 2008 for a partial contribution). |
|
| Withdrawals |
|
| Penalty-free |
|
After age 59-½. |
|
After your account has been
open 5 years
AND
After age 59-½ or one of the exceptions to penalty apply. |
| Penalty |
|
Before age 59-½ .
Also, if you do not start withdrawing by age 70-½. |
|
Before 5-year
holding period or before age 59-½ unless exceptions to
penalty apply. |
| Exceptions to penalty |
|
For Roth earnings and
Traditional IRAs, penalty-free withdrawals include but are not
limited to: qualified higher education expenses; qualified first
home purchase (lifetime limit of $10,000); certain major medical
expenses; certain long-term unemployment expenses; disability;
or substantially equal periodic payments.
|
| Apply |
|
Download
Traditional IRA application |
|
Download
Roth IRA application |
| * For Traditional
IRA contributions in
tax year 2008, the full deductibility AGI limits are $85,000
or less (joint) and $53,000 or less (single); partial deductibility
for AGI up to $105,000 (joint) and $63,000 (single). In addition,
full deductibility of a contribution is available for working
or nonworking spouses who are not covered by an employer-sponsored
plan whose AGI is less than $159,000 in
2008; partial deductibility for AGI up to $169,000 in 2008. |
|
Prospectus
