| Description |
A Traditional IRA is established to save money for retirement.
Up to $5,000 (for 2009) a year of tax-deferred earned income can be placed in the IRA until the account owner reaches 70½ years of age. Account owners may also contribute an additional $5,000 a year of earned income to a separate IRA for a non-income-earning spouse. Account owners who are age 50 or over are allowed to contribute an additional $1,000.
Taxable distributions from an IRA can be taken without penalty starting at age 59˝ and must be started by April 1st of the year following the year the account owner reaches 70½.
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A Roth IRA’s tax advantages differ from the Traditional IRA. The annual contribution limits are the same and, if eligible, your Traditional IRA contributions may be tax deductible. A Roth IRA does not have this feature, but since annual contributions have already been taxed, these contributions can be withdrawn any time you wish. Any earnings are federal income tax—free upon withdrawal if the account has been open for at least five years and you are 59˝ or older, or the distribution is due to disability or death.
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A Rollover IRA is designed as a holding account for funds distributed from an employer's qualified retirement plan such as a 401(k) or 403(b).
Moving funds into a Rollover IRA may allow the account owner to return the funds to another employer's qualified retirement plan in the future.
To initiate a direct rollover from a qualified retirement plan, please contact your plan administrator.
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A Simplified Employee Pension (SEP) IRA is for self-employed individuals and for use by small companies for qualified employees to receive employer contributions.
Employers may contribute up to 25% of an employee's compensation (up to $49,000) per participant in 2009.
Employees may also make traditional contributions to their SEP-IRAs of $5,000 for 2009. Workers age 50 and older may contribute a total of $6,000 and 2009. Workers who make their maximum Traditional contribution to their SEP IRA may not contribute to another Traditional or Roth IRA for the same tax year.
A copy of the employer's SEP plan document (e.g., 5305-SEP Plan Document) must accompany the account application.
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A Savings Incentive Match Plan for Employees (SIMPLE) IRA is an employer-run savings plan that features employee tax-deferred contributions and matching contributions by the employer. Employers with 100 or fewer eligible employees who did not maintain another retirement plan are eligible to establish a SIMPLE IRA.
Each eligible employee can decide whether or not to participate and how much to contribute.
Employer contributions are mandatory. Employee contributions are optional.
Employees may contribute up to 100% of compensation or a maximum of $11,500 for 2009. Participants age 50 and over may contribute up to $14,000 for tax year 2009.
The employer matches employee salary contributions dollar-for-dollar up to 3% of compensation (can be reduced to 1% in any two out of five years), or makes a non-elective contribution of 2% of compensation for all eligible employees (including those who decide not to contribute for themselves).
Funds cannot be removed from the SIMPLE IRA until it has been established for at least two years. Withdrawals from a SIMPLE IRA after two years are still subject to federal income tax and/or a tax penalty.
A copy of the IRS Form 5305-SA, and either 5305-SIMPLE or 5304-SIMPLE, must accompany the account application. Employer contributions are tax-deductible.
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