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ROTH IRA

What is it? Government sponsored savings plan that gives tax advantages for individuals to save money for retirement by contributing post-tax dollars.
Contribution Limits? Up to $5,000 of earned income plus $1000 if age 50+. Contribution limits are reduced by amount put in Traditional IRA.
Who is eligible? You must have earned income and MAGI less than $122,000 for single and $179,000 for married couple in order to contribute to plan.
Advantages? Account grows tax free and the funds can be withdrawn tax free at age 59 ½ if the account has been open for at least 5 years.
Tax Deductible? No
Age Limit For Contributions? No limits
Distribution Requirements? None
Withdrawal Penalties? 10% penalty for withdrawals before 59 ½ , however contributions can be taken out any time.

TRADITIONAL IRA

What is it? Government sponsored savings plan that gives tax advantages for individuals to save money for retirement by contributing pre-tax dollars.
Contribution Limits? Up to $5,000 of earned income plus $1000 if age 50+. Contribution limits are reduced by amount put in Roth IRA.
Who is eligible? You must be under 70 ½ and have earned income in order to contribute to plan.
Advantages? Account grows tax deferred until the funds are withdrawn (and then they are taxed at your ordinary income rate).
Tax Deductible? Yes
Age Limit For Contributions? 70 ½
Distribution Requirements? Must make minimum withdrawals at age 70 ½.
Withdrawal Penalties? 10% penalty for withdrawals before 59 ½


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