IRA Information
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Traditional IRA       Roth IRA       Educational IRA

Traditional IRA



Who can contribute?

Traditional IRAs are available to all investors with earned income at least equal to the amount contributed. Many investors who contribute to a Traditional IRA can deduct all or part if their contribution from their current taxes. You may contribute to a Traditional IRA even if the contributions are not tax deductible. See below.

Contribution Limits

NOTE: The total yearly contribution that can be made by an individual to all IRAs -- Traditional (deductible and non-deductible) and Roth IRAs -- is subject to the limits shown.

Tax Year 2008-2012
            $5000 for single, and
            $10000 for married couples filing jointly
Tax Year 2013
            $5500 for single, and
            $11000 for married couples filing jointly
Tax Year 2014 & After
            Indexed Cost-Of-Living

"Catch-Up" Contributions

Before the end of the taxable year, workers 50 and older can make up for lost time with additional IRA contributions over and above the new maximum limits as follows:


For Year: 2002-2005 	   	$500
	 2006 & After 		$1,000

Single Taxpayer	
  • Full deduction if you are not a participant in an employer-sponsored retirement plan, regardless of income.
  • Full deduction if you are a participant in an employer-sponsored retirement plan and Adjusted Gross Income (AGI) for the tax year 2011 is less than $59,000. Married Taxpayer
  • Full deduction if neither person participates in an employee-sponsored retirement plan, regardless of income.
  • Full deduction if you are not in an employer-sponsored retirement plan but are married to someone who is and your Adjusted Gross Income (AGI) is $178,000 or less.
  • Full deduction if you and your spouse are participants in an employer sponsored retirement plan and your joint tax for the tax year 2011 is less than $95,000
  • Deduction is phased out for income up to $10,000 over the AGIs listed.

  • Traditional IRAs offer two kinds of tax benefits

    For many investors, contributions to Traditional IRAs are tax deductible. For all investors, earnings in a Traditional IRA are tax deferred.

    Using your savings

    Retirement. Your IRA assets may be withdrawn, without penalty, on or after age 59 1/2. Withdrawals from a Traditional IRA must begin shortly after age 70 1/2.

    Early retirement. A 10% penalty on early withdrawals from a Traditional IRA can be avoided if distributions are taken as substantially equal periodic payments. Ask your financial advisor for more details.

    Home purchase. A lifetime maximum of $10,000 in all IRA assets can be used to fund a "first-time" home purchase, without penalty.

    Education. Traditional IRA assets can be used without penalty for qualified higher education expenses (e.g., tuition, room and board, books, and supplies).

     

    Roth IRA


    Who can contribute?

    Roth IRAs are available to most investors with earned income at least equal to the amount contributed. The maximum amount that may be contributed depends on the investor's adjusted gross income.

    Tax advantages

    Contributions to Roth IRAs are nondeductible from federal income tax. As with Traditional IRA accounts, earnings accumulate tax-deferred. Even more exciting, once the account has been opened for five successive tax years, owners may take tax-free distributions of earnings if they meet certain criteria.

    When you withdraw assets of your Roth IRA, you will not have to pay any taxes or penalties if your account has been open at least five years and you are age 591/2 or older.

    Roth IRAs offer the flexibility to continue making contributions after reaching age 70 1/2 and, unlike Traditional IRAs, do not require investors to take minimum distributions after age 70 1/2.

    Using your savings

    Retirement. Your Roth IRA assets are available to you, without tax or penalty, when the account has been open for five years and you are 59 1/2 or older.

    Home purchase. After the account has been open for five years, you may, withdraw a lifetime maximum of $10,000 in all IRA assets without tax or penalty to fund a "first-time" home purchase -even if you are under age 59 1/2.

    Other important financial goals. Contributions to a Roth IRA (as opposed to earnings) can be withdrawn at any time for any purpose without tax. In general, withdrawals of contributions are also penalty free. However, conversion contributions withdrawn within five years may be subject to penalty under certain circumstances. Earnings may or may not be subject to taxes and penalties upon withdrawal.

     

    Educational IRA


    Who can contribute?

    Education IRAs can be established by any adult and offer tax-free earnings and withdrawals for qualified higher education expenses. Up to $500 annually may be contributed on behalf of a child until the child reaches age 18. The maximum contribution by any one person depends on the contributor's adjusted gross income and the amount contributed by others for the beneficiary. If a contribution is made to a qualified state tuition program on a child's behalf, contributions cannot be made to his or her Education IRA for the same year.

    Tax advantages

    Education IRAs offer the important benefit of tax-free withdrawals for qualified higher education expenses (e.g., tuition, room and board, books, and supplies).

    Contributions are made with after-tax dollars. All earnings in the account accumulate on a tax-deferred basis.

    Assets withdrawn from the account by age 30 that do not exceed the child's qualified higher education expenses are not subject to any taxes or penalties.

    Withdrawals of earnings from the account that exceed the child's qualified higher education expenses may be subject to both income taxes and a 10% IRS penalty.


    Using your Savings

    The money in the account must be spent or paid to the beneficiary by his or her 30th birthday. Alternatively, the account may be rolled over into a new Education IRA for a family member of the original beneficiary.

    Unlike other types of accounts typically established for children, the person who establishes the Education IRA retains control over the account.

    As the costs of higher education continue to rise, you may wish to include the Education IRA as one part of a complete education funding strategy.


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