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Individual Retirement Accounts

Traditional IRA


Individual retirement accounts are a smart way to save for the future. A traditional IRA can be opened and funded without any employer participation. Contributions and/or earnings are tax-deferred until retirement. Unlike many employer plans, money in the account is always accessible; however, until age 591/2 there is a 10 early distribution penalty unless you qualify for an exemption due to one of the following: disability, qualifying education expenses, unemployment, qualifying first-home purchases, death, or receipt of your IRA assets in equal payments over your life expectancy.

If you are under 50 years of age at the end of the year: The maximum contribution that you can make to a traditional or Roth IRA is the smaller of $5,500 or the amount of your taxable compensation for that year. This limit can be split between a traditional and a Roth IRA but the combined limit is $5,500. The maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending upon your modified adjusted gross income (modified AGI).

If you are 50 years of age or older before the end of the year: The maximum contribution that can be made to a traditional or Roth IRA is the smaller of $6,500 or the amount of your taxable compensation for that year. This limit can be split between a traditional and a Roth IRA but the combined limit is $6,500. The maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending upon your modified AGI.


Roth IRA


Roth IRAs differ from Traditional IRAs in that the money you contribute to a Roth IRA has already been taxed. So the principal amount is never subject to taxes or penalties in the future, as long as you stay within the contribution guidelines. This retirement plan allows the money you contribute to grow tax-deferred. If you do not withdraw any of the earnings until you have had the plan for at least five (5) years, or satisfy one of the qualifying events, those tax-deferred earnings become tax free. Unlike the traditional IRA, there is no 70 1/2 age limit on making contributions.

If you are under 50 years of age at the end of the year: The maximum contribution that you can make to a traditional or Roth IRA is the smaller of $5,500 or the amount of your taxable compensation for that year. This limit can be split between a traditional and a Roth IRA but the combined limit is $5,500. The maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending upon your modified adjusted gross income (modified AGI).

If you are 50 years of age or older before the end of the year: The maximum contribution that can be made to a traditional or Roth IRA is the smaller of $6,500 or the amount of your taxable compensation for that year. This limit can be split between a traditional and a Roth IRA but the combined limit is $6,500. The maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending upon your modified AGI.