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 Tradition IRA

 Roth IRA

Eligibility

You or your spouse (if married) must have earned income.  Cannot contribute the year you turn 70 1/2.

 

  • You or your spouse (if married) must have earned income.
  • Modified Adjusted Gross Income (MAGI) limits apply:

 

 

2007: $99,000-$114,000 (Single); $156,000-$166,000 (Joint)

 

 

2008: $101,000-$116,000 (Single); 159,000-$169,000 (Joint)

Investment Options

Any investment

Any investment

Contribution Limits

Lesser of 100% of earned income or limit below:

Same as Traditional IRA.

 

Under age 50:            Catch-up (age 50 and up):

$4,000 in 2005               $500 in 2005

$4,000 in 2006               $1,000 in 2006

$4,000 in 2007               $1,000 in 2007

$5,000 in 2008               $1,000 in 2008

 

Spousal Contributions

(Can I contribute for my non-working spouse?)

Yes, as long as they:

  • File a joint tax return
  • Have earned income, and
  • The account owner is under 70 1/2.

Yes. As long as they:

  • File a joint tax return,
  • Have earned income, and
  • Their combined MAGI is below $156,000 (2007) and $159,000 (2008). The contribution phases out between $156,000 - $166,000 (2007) and $159,000 - $169,000 (2008).

Contribution Deadline

Tax-Filing Deadline

Tax-Filing Deadline

Can I deduct my IRA contribution?

  • Yes. However; certain restrictions apply.
  • It may be deductible depending upon your participation in an employer-sponsored retirement plan, and your tax-filing status.
  • If you and your spouse (if married) are not covered by a plan, you can deduct the contribution regardless of income.

No

If I can’t deduct my Traditional IRA, can I still contribute?

  • Yes. You can still make a non-deductible contribution to a traditional IRA.
  • If eligible, it may be more beneficial to contribute to a Roth IRA in this case.

Not applicable

How are Distributions Taxed?

  • Money grows tax-deferred and is subject to ordinary income tax when distributed,
  • If money is taken before 59 1/2,  it may be subject to a 10% early withdrawal penalty, unless an exception is met.

  • Money grows tax-deferred and is tax-free when distributed, as long as certain criteria are met.
  • If money is taken before 59 1/2,  it may be subject to a 10% early withdrawal penalty, unless an exception is met.
  • Contributions can be removed at any time without tax or penalty.

Can I convert from a traditional IRA to a Roth IRA and vice versa?

Yes. As long as you meet certain requirements:

  • You have under $100,000 in MAGI; and
  • If married, you file a joint return,

Pre-tax money in your IRA will be subject to ordinary income tax in the year of conversion.

No, but you can “recharacterize” a conversion until your tax filing deadline. This is sometimes informally referred to as an “unconversion” because it reverses the original conversion.

Loans

No

No

Can I roll my 401(k) into my IRA?

Yes

No, unless it is from a Roth 401(k).