Below are general guidelines to the various retirement accounts available. While this gives a general outline, please contact your tax accountant for any tax advice and eligibility.
- Overview: Allows working individuals to contribute earnings towards retirement. Earnings and qualified contributions are tax deferred until withdrawn. This may also be funded for a non-wage earning spouse.
- Contribution Deductibility: for 2016 and 2017 is the lesser of $5,500 ($6,500 if age 50 or older before the end of the calendar year) or earned income for the year. It is fully deductible if not covered by a retirement plan at work. If a work retirement plan is available deductibility will be determined by the filing status and the Adjusted Gross Income (AGI).
- Eligibility: Anyone under 70 1/2 with earned income.
- Tax Advantage: It grows tax free. Therefore, taxes on gains, dividends and interest are deferred until the money is withdrawn
- Withdrawals: taxed as ordinary income except those that are classed as non-deducible contributions.
- Timing: Withdrawals may potentially be taken without penalty in certain situations, including but, not limited to:
- Reaching age 59½
- death or permanent disability
- first-time home purchase ($10,000 lifetime maximum)
- qualified higher-education expenses
- substantially equal periodic payments
- Penalty: Other withdrawals may incur a 10% penalty tax
- Required Distribution: Minimum distributions must be taken by April 1 of the year following the year in which the account holder reaches age 70½.
ROTH IRAs and Roth Conversion IRAs
- Overview: A Roth IRA accepts only non-deductible contributions, but all earnings and subsequent qualified distributions are tax-free.
- Contribution Deductibility: None.
- Eligibility: Anyone with an adjusted gross income below the IRS limits.
- Tax Advantage: Tax-deferred growth and tax-free qualified withdrawals.
- Timing: Qualified withdrawals include:
- Reaching age 59½
- Death or disability
- First-time home purchase (up to $10,000)
- Required Distribution: No required distribution starting date or amount until the death of the account holder
Roth Conversions - Traditional IRAs, SIMPLE IRAs and SEP IRAs can be converted by paying income taxes (but no tax penalties) on the IRA distribution before rolling over to a Roth IRA. See above ROTH IRAs for additional details.
For further details about retirement options, please call us at 800-541-FUND or you can visit the website of our trustee, Equity Trust: