| Individual Retirement Accounts (IRAs) |
|---|
| | Traditional IRA | Roth IRA |
| Qualifications |
Individual or spouse must have earned income and must not be 70 ½ by the end of the year. |
Individual or spouse must have earned income. May be any age. |
| Maximum contribution to all IRAs | $5,000 |
| Catch-up contribution limit (age 50 or over) | $1,000 |
| If neither individual nor spouse is a participant in an employer's plan |
No AGI phase-out limitation. Contributions are fully deductable for individual and spouse. |
No deductions allowed for contributions. Contributions are subject to AGI phase-out:
MFJ $159,000 – $169,000 Single/HH $101,000 – $116,000. The phase-out applies
without regard to active participation in an employer's plan.
|
| If contributor is an active participant in an employer's plan |
Deduction limited by AGI phase-out limits MFJ $85,000 – $105,000
Single/HH $53,000 – $63,000.
|
| If contributor is not an active participant but spouse is |
Deduction limited by Active participant phase-out range:
$85,000 – $105,000. Non-active participant phase-out range:
$159,000 – $169,000.
|
| Required distribution |
Must begin by April 1, following the year the IRA owner turns 70 ½ |
Distributions required only after the death of the IRA owner. |
| Penalties |
10% penalty may apply to early traditional IRA and non-qualfied
Roth IRA distributions. 6% penalty applies to excess contributions.
50% penalty applies to failure to take required distributions.
|
Individuals with modified AGI of less than or equal to $100,000 can convert a traditional
IRA to a Roth IRA. Beginning in 2010, the $100,000 ceiling on AGI will be removed and
all taxpayers will be able to convert their traditional IRA to Roth IRA, should they choose
to. The amount converted is subject to tax in the year in which the conversion takes place,
but not to the 10% penalty that applies to early IRA withdrawals, when converting prior to
age 59 ½