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Individual Retirement Accounts

 

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

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.

REMEMBER:

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

​Que​stions?  Please contact Consumers@aba.com​ for more information.