Is an IRA Right for You

December 5, 2016

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With the tax advantages offered by IRAs, you may want to consider adding an IRA to your investment and retirement portfolio. Anyone with an income can open an IRA. Also, non-working spouses can open an IRA as long as the household’s taxes are filed jointly.

The chart below provides a high level comparison on Roth and Traditional IRAs.
 

 

Roth IRA

Traditional IRA

Eligibility

Income limit: $116,000 for individual; $183,000 for married couple filing jointly.
Age Limit: None

Income limit: None
Age Limit: Must be under age of 70½

Annual Contribution

Under age 50: $5,500
Age 50 or older: $6,500

Under age 50: $5,500
Age 50 or older: $6,500

Deductibility

Contributions: Not Deductible
Withdrawals: Tax- and penalty-free in retirement if follow all rules

Contributions: Deductible
Withdrawals: Taxed

Withdrawal Requirements

Withdrawals of contributions are penalty-free at any time for any reason. Not required to make RDMs at any age

Over age 59½: May make withdrawals without penalty.
Over age 70½: Must take required minimum distributions; amount based on amount saved and life expectancy

Penalties for Early Withdrawal

Before age 59½: may owe a 10% IRS tax penalty in addition to federal and state taxes on withdrawals of earnings.

Before age 59½: may owe a 10% IRS tax penalty in addition to federal and state taxes on distributions.

 
In addition to these two IRAs, if you are self-employed or a small business owner, you may want to consider SIMPLE or SEP IRAs. A wealth manager can help guide you to the best choice based on your own personal goals and circumstances.


Freedom First Wealth Management
207 Albemarle Ave. SW • Roanoke, VA • 24016
Phone: (540)400-7611 or toll free 888-548-7793 x105

There is no assurance that the techniques and strategies discussed are suitable for all individuals or will yield positive outcomes. This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.

Securities offered through LPL Financial, Member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates. Investment Advice offered through Level Four Advisory Services, a registered investment advisor. Level Four Advisory Services, Freedom First Credit Union, Freedom First Wealth Management are separate entities from LPL Financial. The LPL Financial representative associated with this website may discuss and / or transact securities business only with residents of the following states: CA, DC, FL, MD, NC, SC, TX, VA, WA