| - |
Traditional IRA |
Roth IRA |
| Description |
Government savings plan
that offers tax advantages for individuals to set aside money
for retirement. Contributions are made with pre-tax dollars. |
Government savings plan
that offers tax advantages for individuals to set aside money
for retirement. Contributions are made with after-tax dollars. |
| Tax Advantages |
Account balances compound
tax-free until funds are withdrawn. |
Account balances compound
tax-free. Funds that are withdrawn are tax-free if account is
five years old and account owner is over 59 1/2. |
| Maximum Contributions |
100% of earned income, up to $4,000 ($5,000 in 2008. Plus an additional $1,000 ($1,000 in 2008, if age 50+. Total of $8,000 for married couples in 2007. (Contribution limits are reduced by any contributions made to a Roth IRA.) |
100% of earned income, up to $4,000 ($5,000 in 2008. Plus an additional $1,000 ($1,000 in 2008, if age 50+. Total of $8,000 for married couples in 2007. (Contribution limits are reduced by any contributions to a Traditional IRA.) |
| Eligibility |
Individuals must be under
70 1/2 and have earned income. |
Individuals must have
earned income and adjusted gross income less than $114,000 for
single ($114,000 in 2008, $166,000 for married couple ($166,000 in 2008. |
| Deduction on Contributions |
Yes |
No |
| Penalties for Early Withdrawals |
10% penalty for withdrawals
before age 59 1/2. |
10% penalty for withdrawals
before 59 1/2 and less than a 5 year establishment. (Note: Roth contributions can be taken
out at any time without penalty.) |
| Exceptions for 10% Penalty |
Yes (see exceptions). |
Yes (see exceptions). |
| Maximum age for Contributions to begin |
70 1/2 |
No Limit |
| Required Distributions |
Yes. Minimum withdrawals
begin after the age of 70 1/2. |
No Limit |
