Affinity Federal Credit Union

Home > Advice & Planning >

Financial Learning Center > Investing For Retirement

IRAs (Individual Retirement Accounts)

	A Tax-Free Way to Save: the Roth IRA
	The Traditional IRA
	Catch-Up Contributions
	Will My Contribution Be Deductible?
	The Traditional IRA vs. the Roth IRA
	What Type of Assets Can You Contribute to Your IRA?
	Setting up an IRA
	Investment Considerations for Your IRA

	When Is the Best Time to Contribute?
	Spousal IRAs
	Advantages and Disadvantages of IRA Accounts
	Rollovers to Your IRA
	Converting a Traditional IRA to a Roth IRA
	Roth IRA and 401(k)
	Choosing between the Roth IRA and Other Vehicles
	Roth IRA Conversions in 2010

The Traditional IRA vs. the Roth IRA

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.

Traditional IRA	Roth IRA
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).	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).
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.	Contributions are not deductible.
Anyone can establish a traditional IRA.	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.
Contributions and earnings grow tax-deferred until withdrawal.	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.
Contributions are not allowed after age 70½.	Contributions are allowed after age 70½, provided you have earned income.
Withdrawals must begin at age 70½.	Withdrawals do not have to begin at age 70½.
Penalty-free withdrawals can be made for a qualifying first-time home purchase, subject to a $10,000 lifetime limit.	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.
Penalty-free withdrawals can be made for higher education expenses of the taxpayer, spouse, children, or grandchildren.	Penalty-free withdrawals can be made for higher education expenses of the taxpayer, spouse, children, or grandchildren.

Securities offered by Affinity Investment Services, LLC, 73 Mountain View Boulevard, Basking Ridge, NJ 07920, member FINRA/SIPC. Investments offered by Affinity Investment Services are not deposits or obligations of Affinity Federal Credit Union. They are NOT NCUA INSURED and NOT GUARANTEED by Affinity Federal Credit Union or any governmental agency and are subject to INVESTMENT RISK, including LOSS of PRINCIPAL. Investments may lose value. Affinity Investment Services, LLC is a wholly owned subsidiary of Affinity Federal Credit Union. Business Continuity Disclosure Statement.

* Tax preparers are independent contractors, experienced in income tax preparation. Tax services are not provided by nor supervised by Affinity Federal Credit Union or Affinity Investment Services, LLC.