Contributing to an Individual Retirement Account (IRA) is an important part of a sound financial strategy, even if you are already saving through your employer’s retirement plan. This table compares two common types of IRA—Traditional IRA and Roth IRA—and explains the unique advantages of each in helping you work toward your retirement savings goals. Call your financial advisor today to determine your eligibility and to talk about which type of IRA may be right for you and open an account today.

Traditional IRA Roth IRA
Who can contribute? Anyone can contribute to a Traditional IRA if they have earned income (including minors). Contributions are not permitted after age 70 ½. If you have earned income below a certain amount you may be eligible to contribute the full or a partial amount directly to a Roth IRA (including minors). Contributions are permitted after age 70 ½.
Can a non-working spouse contribute to an IRA? Non-working spouses may contribute to an IRA if they are filing jointly with their working spouse.
What are the tax advantages? Potential earnings grow tax deferred which can help your savings grow faster. Portions of your contributions may also be tax deductible depending on your income. Contributions to your Roth IRA are not tax deductible since you have already paid taxes on those contributions. Potential earnings may be withdrawn tax free at age 59 ½ provided you’ve held the account for at least 5 years.
How much can I contribute? For 2015 & 2016, you can contribute up to $5,500 ($6,500 if you are age 50 or over). Contribution limits are combined if contributing to both a Traditional and a Roth IRA. Contributions must be made by tax filing deadline.
Can I rollover my retirement account from an employer plan into an IRA? Yes. Retirement savings in a 401(k), 403(b), 457 (Governmental), SEP IRA, SIMPLE IRA (after two years) may be consolidated into an IRA. Effective January 1, 2015, only one rollover is permitted in any 12-month period from like IRAs.
Am I required to take a distribution from my account? You can take a distribution from your account at anytime. In order to avoid any penalties, consider taking a distribution after age 59 ½.
Am I required to take a distribution from my IRA? At age 70 ½ you are required to begin taking Required Minimum Distributions (RMDs). Failure to do so triggers IRS penalties of 50% of the non-distributed amounts. There are no RMD requirements for Roth IRAs, so if you don’t need the assets to supplement your income, you don’t have to touch them. This can be a great estate planning tool for families.
Are there any exceptions to the 10% penalty for early withdrawals • First-time home purchase expenses ($10,000 lifetime limit)

• Death or disability

• Education expenses

• Unemployed health insurance or unreimbursed medical expenses (ask your advisor about limits)

• Withdrawals made in equal installments over the account holder’s life expectancy (72(t))

• First-time home purchase expenses ($10,000 lifetime limit)

• Death or disability

• Education expenses

• Unemployed health insurance or unreimbursed medical expenses (ask your advisor about limits)

• Withdrawals made in equal installments over the account holder’s life expectancy (72(t))