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Which IRA Is Right For You? |
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Retirement planning can be confusing. And while there are several different types of Individual Retirement Account (IRA) products available, each offers unique benefits and holds various requirements. Below you will find a comparison between the two most common types of IRAs- a Roth IRA and Traditional IRA.
Traditional IRA vs. Roth IRA
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Traditional IRA
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Roth IRA
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Age Limit To Contribute
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Up To Age 70 ½
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No Age Limit
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Income requirements/limits
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Earned income at least equal to IRA contribution; no income ceiling*
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Earned income at least equal to IRA contribution; income ceiling depends on filing status**
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Distribution requirements
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Distributions must begin at age 70 ½; remainder at death can pass to heirs
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No distribution requirements; entire account can pass to heirs
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Tax Treatment
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Contributions potentially tax-deferred
Earnings grow tax-deferred
Distributions taxable
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Contributions are not tax-deductible
Earnings grow tax-deferred
Qualified distributions are tax-free
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Maximum annual contributions
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$5,000 for tax years 2009 and 2010
For workers age 50 and older $6,000 (2009 and 2010)
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Same as Traditional IRA
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* If you participate in an employer-sponsored retirement plan, tax deferment of contributions to a Traditional IRA depends on your Modified Adjusted Gross Income (MAGI) and your tax-filing status.
Modified Adjusted Gross Income (MAGI) Limits for Roth IRAs
Tax Year 2010
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Filing Status
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Traditional IRA
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Roth IRA
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Single
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$56,000 - $66,000 deductibility phase-out
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$105,000 - $120,000 eligibility phase-out
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Married, filing jointly
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$89,000 - $109,000 deductibility phase-out
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$167,000 - $177,000 eligibility phase-out
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Married, filing separately
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$0 - $10,000 deductibility phase-out
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More than $10,000 not eligible
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