Retirement and Education Accounts
Characteristics
Regular IRA
Roth IRA
Eligibility
  • Individuals (and their spouses) who receive compensation
  • Individuals age 70 1/2 and over may not contribute
  • Individuals (and their spouses) who receive compensation
  • Individuals age 70 1/2 and over may contribute
Tax Treatment of Contributions
  • Subject to limitations, contributions are deductible
  • No deduction permitted for amounts contributed
Contribution Limits
  • Individuals may contribute up to $4,000 annually (or 100% of compensation, if less). This amount increases to $5,000 in 2008. After 2008, cost of living adjustments will be made to the contribution limit, in $500 increments.
  • Deductibility depends on income level for individuals who are active participants in an employer-sponsored retirement plan
  • Individuals may generally contribute up to $4,000 (or 100% of compensation if less). This amount increases to $5,000 in 2008. After 2008, cost of living adjustments will be made to the contribution limit, in $500 increments.
  • Ability to contribute phases out between income levels of $95,000 to $110,000 (individual taxpayer) and $150,000 to $160,000 (married taxpayers)
  • Overall limit for contributions to all IRAs (Regular and Roth combined) is $3,000 annually (or 100% of compensation, if less)
Earnings
  • Earnings and interest are not taxed when received by your IRA
  • Earnings and interest are not taxed when received by your IRA
Rollover/Conversions
  • Individuals may roll over amounts held in employer-sponsored retirement arrangements (401(k), SEP IRA, etc.) tax free to Regular IRA
  • Rollovers from other Roth IRAs or Regular IRAs only
  • Amounts rolled over (or converted) from another Regular IRA are subject to income tax in the year rolled over or converted
  • Tax on amounts rolled over or converted in 1998 is spread over four year period (1998-2001)
Withdrawals
  • Total (principal + earnings) taxable as income in year withdrawn (except for any prior non-deductible contributions)
  • Minimum withdrawals must begin after age 70 1/2
  • Not taxable as long as a qualified distribution - generally, account open for 5 years, and age 59 1/2
  • Minimum withdrawals not required after age 70 1/2
     

 

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