Individual Retirement Options
Even if you are saving for retirement in your employer's workplace plan, you can create your own personal pension plan through contributions to an IRA.
It is important to carefully weigh the rules and potential benefits of each type of IRA before including one in your retirement plans.
Traditional IRA
A traditional IRA can give you an up-front tax deduction and is always tax deferred.
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Eligibility includes anyone with an earned income. |
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Any earnings on the money you contribute grow tax-deferred · Contribution limit is $5,000 a year ($6,000 over age 50). |
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Contributions may be tax deductible if your employer does not offer a retirement savings plan - or if you meet other eligibility requirements. |
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Withdrawals prior to 59½ may trigger a 10% penalty tax. At age 70½, you'll be required to withdraw a minimum amount each year from your IRA, based on an IRS formula. If you miss a withdrawal, you could be subject to a 50% penalty. |
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Direct rollover of assets from employer-sponsored plans allowed. |
Roth IRA
A Roth IRA offers a different approach to tax savings: You can't deduct your contributions, but you can look forward to a lifetime of tax exempt growth and tax exempt withdrawals if you meet the Roth requirements.
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Historically limited to individuals with an adjusted gross income of $100,000 or less (no longer applies in 2010). |
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After-tax contributions offer tax exempt growth and tax exempt withdrawals. |
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Contribution limit is $5,000 a year ($6,000 over age 50). |
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No required minimum distributions. |
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Contributions may continue to be made, even after owner reaches age 70½. |
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Withdrawals prior to age 59½ may trigger a 10% penalty tax. |
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Direct rollover of assets from employer-sponsored plans not allowed. |
2010 changes to Roth rules could cause you to consider converting your traditional IRA assets to a Roth IRA. Want more information? Visit our Roth IRA Center for further details.