October 23, 2015

Three things to consider when using an IRA:

  • Contribution deadlines:  IRAs must be opened and/or funded by the April 15 tax-filing deadline to receive tax deductions.
  • Catch-up contributions: Individuals who have reached age 50 by the end of the year will be able to make additional catch-up contributions of $1,000 per year.
  • Saving at tax time: Have part of your federal-tax refund deposited directly into your IRA.
 

Traditional IRA

Roth IRA

Qualifications

Must have earned income and not have reached age 70 1/2 by the end of the year.

Must have earned income. There are no age restrictions.

Maximum Contributions

Taxable years beginning in 2010 and after -- $5,000*

Taxable years beginning in 2010 and after -- $5,000.*

Catch-Up (50+ Over)

2010 and after $1,000*

2010 and after $1,000*

Tax Status of Earnings

Tax-deferred until withdrawal

Not taxed. Earnings grow tax-free.

Contribution Restrictions 
(based on Adjusted Gross Income)

Yes, if active participant in employer retirement plan. Contribution phase-outs for 2010 tax years. 

Singles - $56,000-$66,000. 
Married joint -- $89,000-$109,000

Contribution phase-outs for 2010 tax year. 
Singles - $105,000-$120,000; 
Married joint - $167,000-$177,000

Tax Deduction

Yes. Contributions up to the limit are fully tax deductible if you are not an active participant in a retirement plan. Otherwise phase-out rules apply.

No. These are after-tax dollars.

Penalties for Early Withdrawal

None if:

  • Over 59 1/2
  • Death or disability
  • Qualified medical expense
  • Certain health insurance
  • Higher education expenses
  • 1st time home purchase (up to $10,000)
  • Due to IRS levy
  • Periodic payments

None if made after a 5-year period and:

  • Over 59 1/2
  • Death or disability
  • Qualified medical expense
  • Certain health insurance
  • Higher education expenses
  • 1st time home purchase (up to $10,000)
  • Due to IRS levy

Required Distributions

Must begin by April following year participant turns 70 1/2

Only after death of participant

Contributions After Age 70 1/2

Not allowed

Allowed

* To be adjusted annually for inflation in $500 increments

REMEMBER:

Retirement Savings Accounts are insured up to $250,000 at FDIC-insured deposit institutions.

Questions? Please contact for more information.

© 2015 American Bankers Association. Reprinted with Permission. All Rights Reserved.


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