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Retirement Accounts


Traditional IRA

Traditional IRA is an account that allows you to defer taxes on the earnings on your contributions until they are withdrawn. Also, certain contributions are tax deductible in the tax year for which they are made.

If you are younger than age 70 1/2 for the entire tax year and have earned income (or your spouse must have earned income), you are eligible to establish a traditional IRA.

You are eligible to establish a traditional or Roth IRA even if you already participate in or are receiving contributions from a retirement plan sponsored by your employer.

Roth IRA

Roth IRA allows only nondeductible contributions and features tax-free withdrawals for certain distribution reasons after a five-year holding period. Since the Roth IRA contributions are nondeductible and taxed in the year they are earned, if you expect to be in a higher tax bracket when you retire, you may benefit more from a Roth IRA that from a traditional IRA.

There are two requirements for eligibility to contribute to a Roth IRA: you must have earned income (or your spouse must have earned income), and your modified adjusted gross income cannot exceed certain prescribed limits.

Roth IRAs can be a good choice if you have many years until retirement or if you plan to pass your IRA on to your heirs who also get the benefit of tax-free income.


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