You can contribute a maximum of $5,000 in 2009. Taxpayers who
are age 50 or older by December 31 can make
an additional $1,000 contribution to their IRAs.
Whether earnings are taxed for federal income
tax purposes upon withdrawal depends on the
type of IRA, traditional or Roth.
A financial planning professional can
help determine which IRA is best for you.
| Traditional Vs. Roth |
| |
Traditional IRA |
Roth IRA |
| Who May Contribute |
All workers under age 70˝ by the end of the calendar year.
Spousal IRA — spouses under age 70˝ by the end of the calendar year if tax filing status is married, filing jointly. |
No age limit, but you must have a modified adjusted gross income (MAGI) below $120,000 if single or $176,000 if married
and filing jointly or qualifying widow(er).
|
| 2009 Contribution Limits |
Individual: $5,000
Married filing jointly: $10,000 (up to $5,000 each) |
Individual: $5,000
Married filing jointly: $10,000 (up to $5,000 each) |
| 2009 Catch-up Contribution |
If you are age 50 or older, you may make an additional contribution of $1,000. |
If you are age 50 or older, you may make an additional contribution of $1,000. |
| Deadlines |
Generally April 15 to contribute for the previous tax year. |
Generally April 15 to contribute for the previous tax year. |
| Federal Income Tax Deductible |
May be able to deduct your contribution, subject to limits if you are covered by an employer plan. |
No income tax deduction. |
| Tax-Advantaged Growth |
No taxes on distributions until you withdraw them. |
Earnings grow potentially tax free and may be withdrawn tax-free after age 59˝ if you have held the account for at least five years. |
| Required Distributions |
In prior years distributions must begin by April 1 of the year after turning age 70˝. However, for 2009, payouts are not required. |
No mandatory age for taking distributions during account owner's lifetime. |
| 401(k) Rollovers |
Once you are eligible to take a distribution from your 401(k), you may roll it directly into a traditional IRA. |
Eligible employees participating in traditional 401(k)s or other qualified plans, 403(b) plans, and governmental 457(b) plans can roll their distributions over into a Roth IRA. This rule applies to distributions received after December 31, 2007, and only applies to direct (trustee to trustee) rollovers — 60 day indirect rollovers are not allowed. |
| Withdrawals |
- After age 59˝, withdrawals are not subject to federal income tax penalties. Withdrawals may be subject to federal and state income taxes.
- Withdrawals prior to age 59˝ may be subject to federal and state income taxes, plus a 10 percent federal income tax penalty may apply.
|
- Contributions may be withdrawn at any time without penalty.
- Early withdrawals may be subject to federal and state income taxes plus a 10 percent federal income tax penalty.
|
| Qualified Early Withdrawals |
You may begin taking withdrawals without any penalties when you reach age 59˝. In addition, penalty-free withdrawals are allowed if:
- You are a first-time homebuyer ($10,000 lifetime limit).
- You are using the withdrawal to pay for certain higher education expenses.
- Certain conditions are met for unemployment or qualifying medical expenses.
- The distribution was a result of your disability or death.
|
Your principal and earnings may be withdrawn completely tax-free if the Roth IRA has been open for five or more years and at least one of the following conditions are met:
- You are age 59˝ or older.
- You are a first-time homebuyer ($10,000 lifetime limit).
- You are disabled.
- Withdrawals are made by your beneficiary after you die.
|
| This IRA May Be Right For You If |
- You do not qualify for a Roth IRA because of your income level.
|
- You expect to be in a lower income tax bracket in retirement.
- You anticipate remaining in your current tax bracket after retirement.
- You expect that when you retire, you will be in a higher tax bracket.
|
| Other
Tax-Advantaged Retirement Accounts |
| Plan Type |
Plan Description |
Tax Deductible |
Withdrawal Age |
| Simplified Employee Pension (SEP) |
A tax-deferred employer-sponsored
retirement plan for self-employed individuals
and small businesses. |
To the employer |
Generally age 59½ |
| 401(k) Plans |
An employer-sponsored retirement
savings plan funded by
employee and sometimes employer
matching contributions. |
Yes |
Generally age 59½ |
| 403(b) Plans |
An employer-sponsored retirement
savings plan funded by
employee and sometimes employer
matching contributions
of public schools, hospitals, and
certain non-profit organizations. |
Yes |
Generally age 59½ |
| Savings Incentive Match Plan
for Employees (SIMPLE) |
An employer-sponsored retirement
savings plan funded by employer
and employee contributions for businesses
with up to 100 employees. |
Yes |
Generally age 59½ |
To access the IRS Publication 590,
Individual Retirement Arrangements,
visit www.irs.gov.
In "Search" type in the keyword "590."
Basic Money Management
Basic Money Management
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