IRAs

Learn the differences between Traditional and Roth IRAs, and the Education Savings Account*:

Who is eligible to Invest?

• Traditional IRA - Anyone under age 70 ½ who has earned income, regardless of income level
• Roth IRA – Full contributions can be made by single filers with a modified adjusted gross income (MAGI) less than $116,000 or married/joint filers with a MAGI less than $183,000. Partial contributions can be made by single filers with a MAGI between $116,000 and $131,000 or married/joint filers with a MAGI between $183,000 and $193,000

What is the maximum annual contribution allowed?

• Traditional IRA - Maximum annual contribution of $6,000 ($7,000 if age 50 or older); If less, your taxable compensation for the year
• Roth IRA - Maximum annual contribution of $6,000 ($7,000 if age 50 or older); If less, your taxable compensation for the year

Are there any tax advantages with IRA investments?

• Traditional IRA - Tax-deferred growth of contributions and investment earnings
• Roth IRA - Tax-free growth of investment earnings

Are there any deductible contributions?

• Traditional IRA - Yes, if your income is below certain limits or if you are not an active participant in an employer-sponsored retirement plan
• Roth IRA - No, contributions must be made with after-tax dollars

Are penalty-free withdrawals allowed prior to age 59½?

• Traditional IRA - Yes, if "substantially equal periodic payments" are taken, or if used for first-time home expenses ($10,000 lifetime maximum), qualified higher education costs or for certain hardships
• Roth IRA - Yes, contributions can be withdrawn free of penalties and taxes. Earnings can be withdrawn penalty-free if used for first-time home expenses ($10,000 lifetime maximum), qualified educational expenses or for certain hardships

Will a distribution be required at any point?

• Traditional IRA - Yes, distributions must begin by April 1 following the year you attain age 70 ½
• Roth IRA - No, you may continue contributions as long as you have earned income and postpone distributions for as long as you like during your lifetime

*This information is based on current interpretation of the language in the 2016 Internal Revenue Service (IRS) Publication 590, Individual Retirement Arrangements (IRAs), and Publication 970, Tax Benefits for Education. Investors should consult with their tax adviser or legal counsel for advice and information concerning their particular tax situation and any updates to the tax law.

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