IRAs: Traditional vs. Roth
Traditional IRAs
A traditional IRA allows you to contribute pretax earnings up to a specific annual limit, toward investments that can grow tax-deferred until the money is withdrawn after age 59 1/2. Contributions to a traditional IRA may be tax-deductible depending on the taxpayer’s income, tax-filing status and other factors. Minimum annual distributions from a traditional IRA are required beginning at age 70 ½.
Roth IRAs
A Roth IRA is a modified individual retirement account in which a person can set aside after-tax income up to a specified amount each year. Contributions can be withdrawn any time tax free and penalty free. Earnings on the account are free from federal income tax after an initial 5 year holding period and after age 59 ½. No minimum annual distributions are required from the Roth IRA.
Traditional and Roth IRA Contribution Limits
| Year |
Age 49 & below |
Age 50 & above |
| 2010 |
$5,000
|
$6,000
|
| 2011 |
$5,000
|
$6,000
|
SEP IRA Contribution Limits
The maximum amount that can be contributed to a simplified employee pension (SEP) plan is 25% of an employee’s compensation, with a $49,000 limit.
SIMPLE IRA Contribution Limits
| Year |
Age 49 & below |
Age 50 & above |
| 2010 |
$11,500 |
$14,000 |
| 2011 |
$11,500 |
$14,000 |
For more information on
Traditional and Roth IRAs, contact
Patty Davidson or
Donna Sanders. They can be reached in Cedar Rapids at (319) 364-3041 or Iowa City at (319) 339-4884. Additionally, feel free to use our
Contact Us online form.