What is an IRA?

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An Individual Retirement Account or Annuity (IRA) allows workers and their spouses to set aside funds for retirement on a tax-deferred basis.

Anyone with earned income (and certain spouses of workers) can open an IRA and accumulate tax-deferred earnings. However, the only workers eligible to take a full IRA federal income tax deduction without regard to their Adjusted Gross Income (AGI) level are those who are not active participants in:

  • -403(b) Plan
  • -Keogh Plan
  • -Qualified Plan


Annual Contributions to a Traditional IRA

Year      Under age 50      Age 50 and Over

2009     $5,000               $6,000

2010     $5,000               $6,000

2011     $5,000               $6,000


What is a Roth IRA?

In 1998, the Traditional IRA just described was supplemented by an alternative individual retirement account known as a “Roth IRA.” Contributions to a Roth IRA by eligible individuals are nondeductible, but earnings grow income tax free and distributions are also income tax free if certain requirements are met.

After the owner has had a Roth IRA for at least five years, the earnings may generally be withdrawn federal income tax free.

  • -After the owner reaches age 59 1/2
  • -Following the owners death
  • -Following the owners disability (defined by the IRS and tax regulations)
  • -First time home purchase ($10,000 lifetime maxium)


Who can contibute to a Roth IRA?

Taxpayers Modified AGI Level (2011)

Married Filing Jointly    Single or Head of Household      Contribution

0 to $169,000                 0 to $107,000                          $5,000

$169,000 to $179,000     $107,000 to $122,000              Reduced

$179,000+                     $122,000+                                -0-

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