Planning for the Future
 
Planning for the Future
 

IRAs at a Glance (Traditional and Roth)

There are many factors to consider when selecting the right IRA for you.

Use the chart below to find out which option is the right one for you. Choose this version of the chart if you prefer to print it out and keep it.

IRA Features
Tax Advantage:
Who Can Contribute:
Maximum Annual Contribution:
Catch-up Contributions:
Are Contributions Tax-Deductible:
Income Taxes on Withdrawal of Gains/Earnings:
Income Taxes on Withdrawal of Contributions:
Penalty on Early Withdrawal:
Required Withdrawals:
Are Rollovers and Transfers Permitted:
  • Traditional IRA

    Earnings grow tax-deferred until withdrawn at retirement.
    Individual with earned income under age 70 ½.

    Non-working spouse under age 70 ½ (must file a joint return that indicates earned income).
    $5,500 for 2016 (reduced by contributions to a Roth IRA).
    In 2016, anyone age 50 or older may make an additional “catch-up” contribution amount of $1,000.
    MAYBE – If no employer sponsored plan, contributions are fully deductible.

    If covered by an employer sponsored plan, deductibility is determined by your Modified Adjusted Gross Income (“MAGI”) and your tax filing status (see Tables below).

    Can also have a non-deductible IRA if income exceeds limits.
    YES – Gains/earnings are taxed at ordinary income rates.
    YES – At ordinary income rates if contributions were tax-deductible.
    NO – If contributions were non-deductible initially
    YES – 10% if under 59 ½, penalty is waived if withdrawals are for:
    • Higher education expenses
    • First-time home purchase (up to $10,000)
    • Death or Disability
    • Equal lifetime payments
    • Certain medical expenses
    YES – Beginning at age 70 ½
    YES – You can rollover/transfer to and from other Traditional IRAs.
    YES – You can rollover from qualified employer sponsored plans, including profit sharing, money purchase, 401(k), 457, and others.
    YES – You may convert a Traditional IRA to a Roth IRA.
  • Roth IRA

    Earnings grow tax deferred, no taxes paid upon withdrawals.
    Individual with any earned income.

    Non-working spouse of any age (must file a joint return that includes earned income).

    Contribution limits are phased out for higher earners (Please see Tables below).
    $5,500 for 2016 (reduced by contributions to a Traditional IRA).
    In 2016, anyone age 50 or older may make an additional “catch-up” contribution amount of $1,000.
    NO – Contributions are non-deductible.
    NO – Tax-free if account is open five years AND
    • Owner is 59 ½ OR
    • First-time home purchase (up to $10,000) OR
    • Death or Disability
    NO – Contributions can be withdrawn at any time without penalty.
    YES – 10% if under 59 ½, penalty waived if withdrawals are for:
    • Higher education expenses
    • First-time home purchase (up to $10,000)
    • Death or Disability
    • Equal lifetime payments
    • Certain medical expenses
    NO
    YES – You can rollover/transfer to and from other Roth IRAs.
    NO – You cannot rollover qualified retirement plan dollars directly to a Roth IRA; assets must be rolled into a Traditional IRA, which can then be converted.
    YES – You may convert a Traditional IRA to a Roth IRA.
    Income Limits for Traditional IRA Deductibility
    Covered by a Retirement Plan

    2016

    • If you are a single taxpayer and your Modified Adjusted Gross Income ("MAGI") is:

      Up to $61,000
      $61,000 – $71,000
      Over $71,000
    • If you are married, filing jointly and your Modified Adjusted Gross Income ("MAGI") is:

      Up to $98,000
      $98,000 – $118,000
      Over $118,000
    • Your Traditional IRA contribution is:

      Fully deductible
      Partially deductible
      Not deductible
      Not Covered by a Retirement Plan

      2016

      • If you are a single taxpayer and your MAGI is:

        Any amount
      • If you are married, filing jointly and your MAGI is:

        Any amount
      • You may take:

        Fully deductible
        Roth IRA Eligibility
        If you are a single taxpayer and your MAGI is:If you are married, filing jointly and your MAGI is:You may make:
        Up to $117,000
        Up to $184,000Full contribution
        $117,000 to $132,000$184,000 to $194,000Reduced contribution
        Over $132,000Over $194,000No contribution
        Traditional IRA to Roth IRA Conversions

        Allowed (single or joint) and, if married, taxpayers must file jointly. The converted amount is taxed as income, but no penalty applies.

        Rollovers
        1. Direct Rollover
        • Lump sum distribution rolled directly from an employer sponsored plan into an IRA
        • Funds cannot be rolled over again until a full year has elapsed
        • Funds remain tax-deferred
        2. Indirect Rollover
        • Taking possession of the distribution from a qualified plan and rolling it over to an IRA or the other qualified plan with 60 day of receipt
        • 20% mandatory tax withholding is imposed on distribution
        • If the 20% is not made up in the rollover amount, it will be taxed as ordinary income and can be subject to a 10% early withdrawal penalty withheld if under age 59½
        3. Transfer - Trustee to Trustee
        • Moving IRA assets from one custodian to or investment vehicle to another IRA
        • Funds remain tax-deferred