Everything You Always Wanted To Know About IRA’s


Individual Retirement Account’s (IRA’s) come in all shapes and sizes.

There is the SEP IRA, the Simple IRA, Roth IRAs and the IRA traditional.    Which IRA is right for you  all depends upon your personal retirement needs; ask your financial planner.

Individual Retirement Account’s can have different contribution limits, rules and benefits.   Ask your financial planner for additional information about these rules and regulations.  Again, your retirement needs will determine which type of Individual Retirement Account you should invest in.

Also keep in mind that the IRS can change the contribution limit each year; so be sure to check with your financial planner to avoid over-contributing.

Individual Retirement Account’s|Everything You Wanted To Know


  • The SEP IRA is a retirement plan set up by those who are self-employed.
  • What makes a SEP IRA so attractive is the annual contribution limits are higher than other retirement plans.
  • The maximum contribution limit for 2010 is 25% of an employee’s compensation…capped at a maximum dollar amount of $49,000.
  • With the SEP IRA there is very little administrative work involved.
  • Contributions are tax-deductible
  • Earnings on the account grow tax deferred.

Simple IRA

  • IRA's in different shapes and sizesThe Simple IRA is a retirement plan used by businesses with less than 100 employees.
  • A Simple IRA is employer sponsored.
  • Employers are generally required to match the employee’s contributions, up to a certain point.
  • The employer match is generally up to 3% of the employee’s compensation.    Under certain circumstances the match can be 2%.
  • With the Simple IRA the administration is relatively easy and the administrative costs are usually low.
  • Contributions are tax-deductible and earnings grow tax deferred.
  • Withdrawals start at age 59 1/2.
  • Withdrawals before 59 1/2 can be taxed.
  • Withdrawals can be hit with an early withdrawal tax penalty.
  • This early withdrawal tax penalty can be from 10% – 25%.
  • A catch-up provisions is available for individuals over the age of 50.
  • For 2010, the contribution limit is $11,500
  • For 2010, the catch-up contribution limit is $2,500.

Roth IRA

  • Roth IRA’s are not employer sponsored.
  • Roth IRA’s are used by individuals to save for their retirement outside of their workplace.
  • You can contribute to a Roth IRA if your modified Adjusted Gross Income is a certain amount:
  • To contribute to a Roth your Adjusted Gross Income must be less than $176,000 if you are married filing jointly.
  • Adjusted Gross Income must be less than $120,000 for singles, head of household or married filing separately to contribute to a Roth.
  • Contributions are not tax-deductible.
  • Your contributions are made with “after-tax” dollars, that money has already been taxed.
  • Your contributions can be tax-free at withdrawal.
  • Your earnings on the account are taxed at withdrawal.
  • For 2010, the contribution limit is $5,000.
  • The catch-up contribution limit is $1,000.

Traditional IRA

  • Not employer sponsored.
  • A retirement plan used by individuals outside the workplace to save for retirement.
  • Contributions can be tax-deductible, depending on your Adjusted Gross Income and if you are covered by another retirement plan at work.
  • Contributions and the earnings on those contributions are taxed at withdrawal.
  • Withdrawals can begin at age 59 1/2.
  • Withdrawals must begin at age 70 1/2.
  • The IRS refers to the withdrawals at age 70 1/2 as Required Minimum Distributions  (RMD’s).
  • Required Minimum Distribution amounts are calculated by a complicated IRS formula.
  • Work with your financial planner or accountant if you are getting close to age 70 1/2.
  • If you begin withdrawals before age 59 1/2, you may pay a 10% early withdrawal penalty.
  • For 2010, the contribution limit is $5,000.
  • The catch-up contribution limit is $1,000.

There are so many Individual Retirement Account’s to choose from – which one should you invest in?  Work closely with your financial planner and accountant to review the rules and benefits of each type of IRA before you chose to invest.


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