IRA's
 Individual
Retirement Accounts (IRA’s)
An Individual
Retirement Account (IRA) is a unique savings plan designed
to help you save for your retirement years.
There
are two types of IRA's, the Traditional and the Roth.
You can open an IRA or make annual contributions until April
15th of the following year.
Traditional
IRA
The Traditional
IRA allows you to defer taxes on your earnings until they
are withdrawn. Also, certain contributions are tax deductible
in the tax year for which they are made. If you have earned
income, you may make a contribution until you reach age 70
1/2, and if you are not covered by an employer-sponsored retirement
plan, your contribution is 100% deductible. You may
contribute 100% of your earned income up to
$5000.00
annually subject to cost of living adjustments. If you are over 50
years of age, you are allowed an additional $1000 catch-up
contribution. The balance will continue to grow
tax-deferred.
Early
withdrawals are allowed for certain reasons and may be penalty-free.
Withdrawals are allowed anytime after you reach the age 59
1/2 and must begin no later than April 1st following the year
in which you turn 70 1/2. You will pay income taxes
only on the amount you withdraw. The balance will continue
to grow tax-deferred.
Roth
IRA
The Roth
IRA is a nondeductible account that features tax-free withdrawals
for certain reasons after a five year holding period. Since
Roth contributions are nondeductible and taxed in the year
they are earned, people who expect to be in a higher tax bracket
when they retire may benefit more from these accounts than
from a Traditional IRA.
You are
eligible to contribute to a Roth IRA if you have earned income,
at any age. You may contribute 100% of your income up
to
$5000.00 annually subject to cost of living adjustments. If
you are over 50 years of age, you are allowed an additional
$1000 catch-up contribution. If you are married, you
must file jointly and your modified adjusted gross income
(MAGI) cannot exceed certain limits.
You can
always withdraw your principal tax-free and IRS penalty free
for any reason. Unlike a Traditional IRA, you never
have to take withdrawals from your Roth IRA.
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