Some of the distinct fundamental differences between a traditional IRA and Roth IRA are as follows:
A. Am I eligible? Individuals under age 70 1/2 with earned income or spouses with earned income are eligible to contribute to a Traditional IRA.
B. Maximum Annual Contribution – 2013 tax year: $ 5,500 ($6,500 age 50 and older).
C. Tax-Deductible Contributions – You may be able to deduct some or all of your contributions depending upon your adjusted gross income and whether you or your spouse are covered by an employer’s retirement plan.
D. Withdrawals – A 10% penalty applies if withdrawals are done prior to 59 1/2.
E. Distribution – Minimum distributions are required beginning at age 70 1/2.
A. Contributions – Unlike a traditional IRA, Roth IRA contributions are not deductible from your adjusted gross income.
B. Advantage – You may withdrawal earnings tax free and penalty tax free at age 59 1/2, if the account is at least five years old.
C. You can keep contributing to a Roth IRA after age 70 1/2.
D. Individuals are allowed to contribute the same amount as a traditional IRA.
For more information regarding IRAs, contact Robert Burch at (773) 779-4447.