IRAs (Individual Retirement Accounts)
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The Traditional IRA vs. the Roth IRA
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IMPORTANT NOTE: See the section Roth IRA Conversions in 2010 to learn about Roth IRA conversions that may be available to you even if you do not meet the criteria for a Roth IRA.
The following chart illustrates the differences between the traditional IRA and the Roth IRA. Use the information to help you decide which IRA best suits your situation.
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Traditional IRA
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Roth IRA
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Maximum annual contribution = $5,000 in 2009 and 2010, $6,000 in 2009 and 2010 for those reaching age 50 by December 31, 2009 (December 31, 2010 for 2010 tax filing).
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Maximum annual contribution = $5,000 in 2009 and 2010, $6,000 in 2009 and 2010 for those reaching age 50 by December 31, 2009 (December 31, 2010 for 2010 tax filing).
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If neither you nor your spouse is covered by a pension plan, the IRA contribution is fully deductible. If you or your spouse is covered by a pension plan, the IRA contribution deduction may be limited or completely phased-out.
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Contributions are not deductible.
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Anyone can establish a traditional IRA.
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In order to establish a Roth IRA, your 2010 modified adjusted gross income, if filing a joint return, cannot exceed $177,000 ($176,000 in 2009) and $120,000 (same in 2009) for singles. In effect, this limitation will be eliminated after 2009.
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Contributions and earnings grow tax-deferred until withdrawal.
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Contributions and earnings grow tax-free and withdrawals are tax-free, provided the IRA is held for at least five years and withdrawals begin after age 59½ or are due to death or disability, or for "first-time home buyers" subject to a $10,000 limit.
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Contributions are not allowed after age 70½.
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Contributions are allowed after age 70½, provided you have earned income.
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Withdrawals must begin at age 70½.
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Withdrawals do not have to begin at age 70½.
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Penalty-free withdrawals can be made for a qualifying first-time home purchase, subject to a $10,000 lifetime limit.
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Provided the IRA is held for at least five years, penalty-free, tax-free withdrawals can be made for a qualified first-time home purchase, subject to a $10,000 lifetime limit.
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Penalty-free withdrawals can be made for higher education expenses of the taxpayer, spouse, children, or grandchildren.
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Penalty-free withdrawals can be made for higher education expenses of the taxpayer, spouse, children, or grandchildren.
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**Securities offered by Registered Representatives of ING Financial Advisers, LLC (IFA), member SIPC. Investment Advisory Services offered by Investment Advisery Representatives of IFA. Insurance sold through licensed insurance representatives of various companies in association with CU Financial Insurance Group, LLC (CUFIG) a wholly owned subsidiary of ABCO Federal Credit Union. ABCO Federal Credit Union and its subsidiaries are not corporate affiliates of IFA.Nondeposit investment products are not federally insured, not obligations of the Credit Union, not guaranteed by the Credit Union or any affiliated entity, involve investment risks, including the possible loss of principle and may be offered by an employee who serves both functions of accepting member deposits and selling nondeposit investment products. IFA products are not offered, recommended, sanctioned or encouraged by the NCUA or the Federal Government. P.O. Box 221, Rancocas, NJ 08073; phone 1-888-439-0770; fax 856-439-1199.
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