Traditional IRA
| DEDUCTIBLE IRA | |
|---|---|
| Eligibility: | Must have earned income |
| Under age 70½ | |
| If enrolled in an employer-sponsored retirement plan, you must be under certain income thresholds to deduct your contribution. | |
| Deductibility Phase Out: | Married Filing Jointly $53,000 - $63,000 |
| Married Filing Singly $ 0 - $10,000 | |
| Single/Head of Household $33,000 - $43,000 | |
| Contribution Tax Limit Year 2011-2012: |
Lesser of $5,000 or 100% of earned income. |
| Contributions are non-deductible | |
| Participants age 50 and older may contribute an additional $1,000 | |
| Suitable For: | Clients that need tax-deduction |
| Clients that expect to be in a lower tax bracket at retirement | |
| Non-employed spouses who file a joint return | |
| Features: | Contributions may be tax-deductible |
| Earnings accumulate on tax-deferred basis |
| NON-DEDUCTIBLE IRA | |
|---|---|
| Eligibility: | Must have earned income |
| Under age 70½ | |
| Contribution Tax Limit Year 2011-2012: |
Lesser of $5,000 or 100% of earned income |
| Should file IRS Form 8606 in year of contribution to prevent repaying taxes on principal at time of withdrawal | |
| Participants age 50 and older may contribute an additional $1,000 | |
| Suitable For: | Clients that expect to be in a lower tax bracket at retirement |
| Clients who are ineligible for Roth IRA contributions |
ADVANTAGES:
- May reduce current taxable income
- Earnings grow tax deferred
- Penalty-free early distributions prior to age 59 ½ for certain purposes
- First-time home purchase expenses
- Qualified higher education expenses
- Substantially equal periodic payments
- Certain medical expenses in excess of 7.5% AGI
- Certain unemployed expenses, Death or Disability
- Year 2008 - $5,000 annual contribution