Individual Retirement Accounts (IRAs)
Pick the account that is right for you. |
|
Traditional IRA |
Roth IRA |
Education IRA (Coverdell Education Savings Account) |
Spousal IRA |
Simplified Employee Pension |
| Who Is Eligible? |
Anyone with earned income |
Anyone with earned income |
Anyone can create an account for any minor child until the age of 18 |
Married taxpayer can create a Traditional IRA or Roth IRA in the name of his or her spouse who earns less than $5000 in annual compensation for tax year 2008. The couple must file a joint tax return in the year of the contribution. |
Small business owners |
| Used For |
Retirement saving |
Retirement saving |
Education expenses |
Retirement saving |
Small business employee retirement saving |
| Annual Contributions |
Deductible amount depends on AGI and participation in other retirement plans. |
Not tax deductible. Contributions are made with after-tax dollars. |
Not tax deductible. Contributions are made with after-tax dollars. |
Set up as Traditional IRA - Deductible amount depends on AGI and participation in other retirement plans. Not tax deductible if set up as a Roth IRA. |
Employees are not taxed for the contributions but are taxed at distribution upon retirement. Employer's contributions are tax deductible. |
| Annual Contributions Limit |
$5000 per person to all IRAs combined (plus $1000 catch-up provision if you're 50 or older) for tax year 2008 and 2009 |
$5000 per person to all IRAs combined (plus a $1000 catch-up provision if you're 50 or older) for tax year 2008 and 2009 |
Up to $2000 annually for each beneficiary |
Working spouse may contribute up to $5000 per year to the Spousal IRA and up to $4000 per year to his or her own IRA for tax year 2008 and 2009 |
Annual contribution can be any amount up to 25 percent of the employee's compensation but not more than $46,000 for 2008 and $49,000 for 2009, and employees cannot contribute unless he or she is the sole employee |
| Tax Benefits |
Tax-deferred contributions and earnings |
Earnings grow tax free |
Earnings grow tax free |
Traditional IRA - tax-deferred contributions and earnings. Roth IRA - earnings grow tax free. |
Tax-deferred contributions and earnings |
