| Feature |
Traditional IRA |
Roth IRA |
| Eligibility |
All workers under age 70½ by the end of the calendar year
Spousal IRA -- spouses under age 70½ by the end of the calendar year if pre-tax filing status is married, filing jointly
|
Phase out for single AGI1 $95,000 - $110,000 for 2006 and $99,000 - $114,000 for 2007, and $101,000-$116,000 for 2008
or joint AGI1 $150,000 - $160,000 for 2006 and $156,000 - $166,000 for 2007, and $159,000-$169,000 for 2008
For conversion, AGI1 (without regard to the taxable amount of the converted IRA) may not exceed $100,000 for years prior to 2010
A Roth IRA and Spousal Roth IRA are available at all ages
|
| Maximum Contribution |
Individual:
| Tax Year |
Under age 50 |
Age 50 or older |
| 2007 |
$4,000 |
$5,000 |
| 2008 |
$5,000 |
$6,000 |
| 2009-2010 |
$5,000 indexed
for COLA
|
$5,000 indexed for
COLA plus $1,000 |
Although an individual may establish both a Traditional and Roth IRA, total contributions to all IRAs may not exceed the annual contribution limit in effect for the tax year. Annual contributions to Traditional and Roth IRAs may not exceed compensation (including taxable alimony and separate maintenance payments. For a self-employed person, "compensation" means "earned income."
Spousal: For the lesser compensated spouse, the lesser of the amount allowed above for an individual or the combined compensation minus contributions to the spouses' IRAs.
Rollover: No dollar limit nor income requirements for Traditional or Roth IRA rollover contributions. |
| Federal income tax treatment of contributions |
Fully deductible for those not covered by an employer retirement plan (an exception applies for a non-covered spouse who files a joint return if AGI exceeds $150,000 for 2006; $156,000 for 2007; $159,000 for 2008) or if covered below a certain AGI1 (in 2006: $75,000 joint or $50,000 single; in 2007: $83,000 joint or $52,000 single; in 2008: $85,000 joint or $53,000 single).
Nondeductible for employees covered by an employer retirement plan with AGI1 above a certain amount (in 2006: $85,000 joint or $60,000 single; in 2007: $103,000 joint or $62,000 single; in 2008: $85,000 joint or $53,000 single). |
Not deductible (Taxable portion of traditional IRA conversion taxed currently) |
| Annual contribution deadline |
Tax-filing deadline for the year (without extensions) |
Tax-filing deadline for the year (without extensions) |
| Penalty tax on excess contributions |
6% |
6% |
| Tax-deferred growth |
Yes |
Yes |
| Taxation of distributions after age 59½ |
Generally subject to federal income tax (unless non-deductible contributions were made) |
Free from federal income tax for qualified distributions |
| Tax-free return of basis |
Any basis (non-deductible contributions) is received as a portion of each distribution. |
Basis (contributions) removed first, tax-free (Conversion basis subject to possible penalty tax if withdrawn within 5 years of conversion.) |
| Required distributions |
April 1 of the year following the year of attainment of age 70½ |
No required distributions except in the case of death. |
| Penalty tax on insufficient withdrawals after age 70½ |
50% of amount that should have been withdrawn |
Not applicable |
| Distributions before age 59½: |
Generally taxable and subject to 10% penalty tax unless an exception applies |
Any gain taxable and subject to 10% penalty tax unless an exception applies |
| (Certain exceptions are:) |
| First-time home buyer |
Generally taxable but up to $10,000 penalty-tax free |
Up to $10,000 penalty-tax free. If after 5 years, up to $10,000 also received tax free |
| Qualified higher education expenses |
Generally taxable but not subject to 10% penalty tax |
Any gain taxable but not subject to 10% penalty tax |
| Death or disability |
Generally taxable but not subject to 10% penalty tax |
Penalty tax-free. If after 5 years, distributions are also tax free |
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