| | Traditional IRA | Roth IRA |
| Suitable For: | Wage-earning taxpayer and nonworking spouse who file a joint return | Wage-earning taxpayer and nonworking spouse who file a joint return |
| Features: | Earnings grow tax-deferred and contributions may be tax-deductible | Earnings grow tax-free, contributions are not tax-deductible, and contributions can continue after age 70-1/2 |
| Deadline to Establish: | Tax filing deadline not including extensions (usually April 15) | Tax filing deadline, not including extensions (usually April 15) |
| Deadline to Contribute: | Tax filing deadline not including extensions (usually April 15) | Tax filing deadline, not including extensions (usually April 15) |
| Eligibility Requirements: | Must be under the age of 70-1/2 and have earned income for the year | Must have earned income for the year. $5,000 contribution limit phased out for single filers with MAGI of $105,000-$120,000, married filing jointly with MAGI of $167,000-$177,000, or married filing seperately with MAGI of $0-$10,000. Roth conversions are allowed if MAGI is under $100,000 and you are not married filing a seperate return. |
| Who Contributes: | Individuals | Individuals |
| Maximum annual contribution limits: | For 2010, contributions of up to $5,000 or 100% of earned income ($6,000 for account holders age 50 or older), whichever is less. A nonemployed spouse may contribute up to $5,000 per year ($6,000 for account holders age 50 or older). | For 2010, contributions of up to $5,000 or 100% of earned income ($6,000 for account holders age 50 or orlder), whichever is less. A nonemployed spouse may contribute up to $5,000 per year ($6,000 for account holders age 50 or older). |
| Distributions: | Penalty-free distributions include reachung age 59-1/2 , death, permanent disability, higher education expenses, first-time home purchase (with a $10,000 lifetime limit), payment of health insurance for the unemployed, and payment of medical expenses above 7.5% of AGI. Required minimum distributions (RMD's) must begin by April 1 of the year following the year in which the individual turns 70-1/2. | Cost basis can be removed at any time. Distributions are penalty-and tax-free for earnings and conversion assets that are in the account for five years and meet one of the following: reaching age 59-1/2, death, disability, or first-time home purchase (with a $10,000 lifetime limit). Earnings spent for payment of medical expenses above 7.5% of AGI and withdrawals for education are penalty-free, but gains are taxed. |
| Tax Treatment of Distributions: | Generally taxed as earned income | Distributions are tax-free if they meet the criteria above. |
| Vesting: | Always 100% | Always 100% |
| Loan Feature: | N/A | N/A |
| Administration: | None | None |
