Which IRA is right for you?
A tax break is a terrible thing to waste. So if you're not taking advantage of an IRA, you may be missing out on an exceptional opportunity. There's a suitable IRA for virtually any personal situation. Depending on your income, you may qualify for one or more of the following IRAs:
Roth IRA - A better IRA for almost everyone
- Contributions are not tax-deductible, but money can accumulate tax-free.
- Eligible taxpayers can take a tax credit of up to 50 percent (maximum $2,000) on their annual contribution amount.
- Tax-free and penalty-free withdrawals of annual contributions can be made at any time.
- Tax-free and penalty-free withdrawals of earnings can be made after five years and
- at age 59-1/2, or
- if younger than 59-1/2 for a first-home purchase (up to $10,000) or
- in case of death or disability
- There is no requirement to begin taking distributions when you reach 70 ½ years of age. You can even continue making contributions if you're still working.
Traditional deductible IRA - Still the best for certain people
- Contributions are tax-deductible.
- Assets grow tax-deferred until withdrawn
- Eligible taxpayers can take a tax credit of up to 50 percent (maximum $2,000) on their annual contribution amount.
- Withdrawals are penalty-free for post-secondary education, a first-home purchase (up to $10,000) and certain medical expenses.
Traditional non-deductible IRA
- Assets grow tax-deferred until withdrawn - appropriate for those whose income is too high for a Roth or Traditional deductible IRA.
