Traditional and Roth Individual Retirement Accounts (IRAs)

What is the most significant differences between a Roth IRA and a Traditional IRA?

The main differences are the tax treatment of the initial deposit, and the future earnings.  With a traditional IRA, you may be able to deduct contributions, which will reduce your tax liability now.  You pay taxes on the funds when you withdraw them.  Roth IRAs do not offer tax deductions, but as long as you have the account for at least five years and wait until age 59 1/2 before withdrawing the money, you never pay taxes on the earnings.

Am I eligible for an IRA?

That depends on the type of IRA you would like to open.  If you are eligible, you may contribute to both IRA types, but your total contributions to both must not exceed the annual limit.  This is general information and you should seek tax advice to help determine the best IRA for you.

IRA Type	Age Limit	MAGI Requirements
Traditional IRA	Under 70 1/2	Single Filer:  Must have earned compensation Married, Joint Filer:  One must have earned compensation
Roth IRA	None	Single Filer:  Must have earned less than $105,000 Married, Joint Filer:  Must have MAGI less than $166,000

How much money can I contribute to an IRA?

You may contribute 100% of your compensation, up to the annual contribution limit for the year to which you are allocating your contribution.  "Catch-up" contributions are available if you are age 50 or older by December 31 of the year for which you are making contributions.

Tax Year	Individual  Contribution Limit	"Catch-Up" Amount (for Owners 50 or older)	Total Contribution (for Owners 50 or older)
2008	$5,000	$1,000	$6,000
2009	$5,000 (Future years may be adjusted for inflation in $500 increments)	$1,000	$6,000

For more information regarding LorMet IRAs, 401K Rollovers, contact a Member Service Representative at 440-960-6600. 

 

 

NOTE:  The information provided below is not intended as tax advice; please consult a tax professional.