Comparison of a Traditional IRA to a Roth IRA
Which is Best for Me?
As of January 1, 2008 | Traditional IRA | Roth IRA |
| How Much Can I Invest 2008 2009 * | 2008 - $5,000 + $1,000 (50 and over) 2009 - Indexed *Not to exceed earned income for the year | 2008 - $5,000 + $1,000 (50 and over) 2009 - Indexed *Not to exceed earned income for the year |
| Are contributions to my IRA Deductible in the current tax year? | Yes | No |
| Will my investment income in the plan be taxed year to year? | No Earnings grow tax deferred | No Earnings grow tax free |
| Will I be required to pay income tax when I withdraw funds after age 59 ½? | Yes | NoA Roth IRA must be five years old to avoid withdrawal penalty |
| Is there a penalty for early withdrawal? | 10% of amount withdrawn | 10% of amount withdrawn |
| At what age may I open an IRA? | You must be under age 70 ½ | There is no age restriction – Young or Old |
| Is there a Mandatory Withdrawal? | Yes (Starting no later than April 1 of the year following your age 70 ½ birthday) | No |
| How do I qualify to make a full contribution to an IRA this year? | You must have Earned Income and be 70 ½ or younger to make a contribution. (see “Plan at Work Restrictions”) |
|
| Once I start an IRA must I make a contribution every year? | No Contributions are voluntary | No Contributions are voluntary |
| May I have more than one IRA? | Yes However, the total contribution in any year is limited as if you have one IRA | Yes However, the total contribution in any year is limited as if you have one IRA |
| If I missed, skipped or forgot to make a contribution to my IRA, can I make “make-up” contributions? | Generally, No. However, you may make a contribution for last year if you do so before your income tax file date for the year. Generally, April 15 of the following year. | Generally No. However, you may make a contribution for last year if you do so before your income tax file date for the year. Generally, April 15 of the following year. |
| May I contribute to an IRA if I also have a tax preferred retirement plan at work? | Yes – If your AGI is under $83,000 (joint) Phase out – If your AGI is between $83,000 and $103,000. No – If your AGI is over $103,000 | Yes – If your AGI is under $83,000 (joint) Phase out – If your AGI is between $83,000 and $103,000. No – If your AGI is over $103,000. |
| I do not know if I am covered by a retirement plan at work? | Look at your W-2 form at the end of the year. There is a box titled “Retirement Plan.” if the box is checked, you are covered by an employer plan. | Look at your W-2 form at the end of the year. There is a box titled “Retirement Plan.” if the box is checked, you are covered by an employer plan |
| I am 66 years old. I have already begun receiving benefits from the retirement plan of my previous employer. I now have a new job. May I contribute to an IRA. | Yes Until your reach 70 ½ | Yes Based on income restrictions |
| Can I use the money in my IRA to buy Life Insurance? | No | No |
| Can I use the money in my IRA to buy an annuity? | Yes (with certain restrictions) | Yes (with certain restrictions) |
| What may I contribute to my IRA? | New contributions must be made in cash. (Not property) | New contributions must be made in cash. (Not property) |
The IRA Club offers independent retirement account education and consulting. The IRA Club is a retirement account facilitator. The IRA Club does not offer or sell insurance or security products. The IRA Club makes no investment recommendations. The IRA Club is not a Registered Investment Advisor. The information in this document is not intended as legal advice. The IRA Club and its employees do not render legal advice. Every investor is encouraged to seek professional legal and accounting advice prior to engaging in any transaction.
The IRA Club does not charge an asset management fee or custodial fees. There is a onetime consultation fee for individuals who want to become a client and take advantage of The IRA Club services.
