Traditional IRA Roth IRA

Highlights

A Regular or Traditional IRA allows working individuals to contribute earnings toward their retirement. Qualified contributions and their earnings are tax-deferred until withdrawn.

An IRA can also be funded for a non-wage earning spouse.

A Roth IRA accepts only non-deductible contributions, but all earnings and subsequent qualified distributions are tax-free.

Roth Conversions − Traditional IRAs, SIMPLE IRAs and SEPs can be converted by paying income taxes (but no tax penalties) on the IRA distribution before rolling over to a Roth IRA.

Eligibility

Anyone under age 70½ with annual earned income may contribute.

Anyone (no age requirements) with earned income who falls within the Roth AGI1 limits may contribute.

AGI limits do not apply for Roth conversions in 2010 and later years.

Contribution Limits

For 2013-2014, those under age 50 may contribute up to $5,500 annually (or 100% of compensation, whichever is less).

Individuals age 50+ may contribute up to $6,500.

For 2013-2014, those under age 50 may contribute up to $5,500 annually (or 100% of compensation, whichever is less).

Individuals age 50+ may contribute up to $6,500.

Tax Advantages

For individuals who are not active participants in an employer-sponsored retirement plan, IRA contributions are fully deductible at any income level.

For individuals participating in an employer-sponsored plan, IRA contributions may be deductible, depending on AGI1.

Contributions are not tax deductible, but earnings grow tax-free.

Withdrawals Taxation

Any withdrawals (except non-deductible contributions) are taxed as regular income.

Qualified withdrawals are tax-free.

Timing

Withdrawals may be taken without penalty in certain situations, including:

  • attainment of age 59½
  • death or permanent disability
  • a first-time home purchase ($10,000 maximum)
  • qualified higher-education expenses
  • 72(t) periodic payments

Penalty: Other withdrawals may incur a 10% penalty tax

In addition to the criteria for Traditional IRA withdrawals, withdrawals from a Roth IRA cannot be taken without penalty until at least 5 years from the date of the first contribution or conversion.

Penalty: Other withdrawals may incur a 10% penalty tax

Required Distributions

Minimum distributions must be taken beginning at age 70½

No required distribution starting date or amount until the death of the account holder

Deadline to Establish

Tax filing deadline for the year of the contribution

Tax filing deadline for the year of the contribution

Deadline for Contributions

Tax filing deadline for the year of the contribution

Tax filing deadline for the year of the contribution

1 Modified Adjusted Gross Income Limits for Traditional and Roth IRAs

Single Filer Joint Filer
Fully Deductible Partially Deductible Fully Deductible Partially Deductible
Traditional 2013 < $60,000 $60,000 − $70,000 < $96,000 $96,000 − $116,000
2014 < $59,000 $59,000 − $69,000 < $95,000 $95,000 − $115,000
Roth 2013 < $114,000 $114,000 − $129,000 < $181,000 $181,000 − $191,000
2014 < $112,000 $112,000 − $127,000 < $178,000 $178,000 − $188,000

Self-Directed IRA Services, Inc. © 2014. All rights protected. Last Revised 1.2.2014