| Traditional and Roth Contribution
Limits |
|
Year |
Contribution
Limit |
Catch-up for
age 50 or older contribution limit |
Contribution
Limit for Age 50 and older |
2008 |
$5,000 |
$1,000 |
$6,000 |
| 2009+ |
$5,000 + COLA* |
$1,000 |
$6,000 + COLA* |
*Cost Of Living Adjustments
(COLA)
Note: $1,000 'catch-up' contribution can be made to IRAs
by each qualifying individual that is 50 years or older. |
| |
| |
Roth
IRA |
Traditional
IRA |
| Who
can contribute? |
You
are eligible if you earn compensation and your MAGI* is
less than the defined limits set by Congress. If your
MAGI is too high to contribute the annual contribution
limit, you may be able to make a smaller contribution.
|
Anyone
under age 70 1/2 who has income from compensation (or
who is filing jointly with a spouse who earns compensation).
Anyone
who has received a distribution from a qualified retirement
plan and decides to move the proceeds of the plan into
an IRA. |
| How
much can I contribute? |
You
may be able to contribute up to $5,000 in 2008.
For
owners age 50 and older, you may be able to contribute
up to $6,000 in 2008.
Contributions
cannot exceed compensation. |
You
may be able to contribute up to $5,000 in 2008.
For
owners age 50 and older, you may be able to contribute
up to $6,000 in 2008.
Contributions
cannot exceed compensation. |
| Who
can make deductible contributions? |
No
one can deduct contribution. |
Deductible
up to annual contribution limit:
- Single individuals not active
in employer retirement plans
|
- Single individuals active in
qualified retirement plans with MAGI below defined
limits
|
- Married couples with neither spouse active
in an employer retirement plan
|
- Married individuals active in qualified retirement
plans filing joint tax returns with MAGI below
defined limits
|
- Married individuals not active in qualified
retirement plans filing joint tax returns with
spouses who are, as long as MAGI is below defined
limits
|
|
| What
are the tax advantages? |
- Earnings are tax-deferred and
withdrawals are tax-free if the account is open
for five tax years and withdrawals are for a
qualified reason (age
59 1/2, disability, death, or a first-time home
purchase**)
|
- Not required to start withdrawals at age
59 1/2
|
|
- Earnings grow tax-deferred
until withdrawn
|
- Contributions may be tax-deductible
|
|
When
can I withdraw without restrictions?
Not
intended as tax advice. Please consult a tax professional.
*MAGI - Modified Adjusted Gross
Income. Contribution and deductibility limits change
frequently. Consult your tax professional regarding
your individual circumstances.
**Lifetime limited for exemption
on first-time home purchase if $10,000 |
- Regular contributions can be withdrawn tax-free
and penalty-free at any time
|
- After the account has been open five tax years,
earnings can be withdrawn tax-fee and penalty-free
for any of these reasons: age
59 1/2, disability, death, or a first-time home
purchase**
|
|
Withdraw
penalty-free for any of the following reasons:
- Qualified higher-education
expenses
|
- First-time home purchase**
|
|
|
|
|
- Qualifying medical expenses
exceeding 7.5% of adjusted gross income
|
- Payment to beneficiaries upon
the owner's death
|
- Payment of health insurance
premiums while unemployed for 12 weeks or longer
|
|
| |
| Traditional
IRA |
| You can contribute to a traditional IRA
if you earn compensation and you will not reach age 70
1/2 by the end of the year. If you file a joint tax return,
you can treat your spouses's compensation as your own
(except your combined contributions cannot exceed your
combined compensation). All earnings in the traditional
IRA are not taxed until they are withdrawn. The ability
to defer taxes on the earnings, and to withdraw in a year
when you may be in a lower tax bracket, can mean more
after-tax dollars for your retirement. See your tax advisor
to determine if your contributions are tax deductible. |
| |
| Roth IRA |
| Unlike traditional IRAs, your contributions
to a Roth IRA are never tax-deductible. However, the money
in your Roth IRA, including earning, can be withdrawn
tax-free. Of course, you must conform to the plan provisions
to get this tax-free advantage. You are eligible if you
earn compensation and your income is less than limits
set by Congress. A single filer who has modified adjusted
gross income (MAGI) up to $95,000 can make the full Roth
IRA Contribution for that year. Each spouse filing a joint
federal income tax return showing a MAGI up to $150,000
can make the full Roth IRA contribution for that year.
Some people with higher MAGI may be able to make smaller
contributions. |
| |
| Coverdell
Education Savings Account (ESA) |
| The sole purpose of the Coverdell Education
Savings Account (ESA) is to help you pay for your child's
education expenses, such as tuition, fees, books, supplies,
equipment, and in some cases, room and board, and computers.
Unlike the traditional IRAs, your contributions to a Coverdell
ESA are never tax-deductible. However, a Coverdell ESA
offers you the potential for tax-free withdrawals -- including
earnings. No taxes are due on withdrawals used for qualified
higher-education expenses. |
| |
