CFP

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Types of Retirement Plans - Other Tax-Advantaged Retirement Plans

Types and basic provisions

A. Traditional IRA
A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA.

  • Individual Retirement Account - A trust or custodial account set up in the United States for the exclusive benefit of an individual or his or her beneficiaries.
  • Individual Retirement Annuity - An annuity contract or endowment contract purchased from a life insurance company. Must be issued in the name of owner with either the owner or beneficiaries who survive owner the only ones who can receive the benefits or payments.
  1. Eligibility - Anyone who received taxable compensation during a tax year and was not age 70½ by the end of that year.
  2. Annual contributions limits - The smaller of the following amounts:
    • Individual Retirement Account - A trust or custodial account set up in the United States for the exclusive benefit of an individual or his or her beneficiaries.
    • Individual Retirement Annuity - An annuity contract or endowment contract purchased from a life insurance company. Must be issued in the name of owner with either the owner or beneficiaries who survive owner the only ones who can receive the benefits or payments.
  3. Spousal IRA limit - An individual who files a joint return and has taxable compensation is less than his or her spouse is limited to the following amounts:
    • $5,500 ($6,500 if age 50 or older) or
    • Taxable compensation for the year.
    • These limits apply to total contributions made to all IRAs benefiting the same individual
  4. Contributions deadline - Contributions for a given year may be made any time during that year or by the due date for filing a return for that year, usually April 15 of the following year.
    • $5,500 ($6,500 if 50 or older).
    • Total compensation includable in gross income for both spouses reduced by the following:
      • Spouse's IRA contribution for the year to a traditional IRA.
      • Any contributions on spouse's behalf to Roth IRA.
    • Deduction limits
      • Age 70½ rule - Contributions cannot be made to a traditional IRA for the year in which an individual reaches age 70½ or for any later year.
    • Spousal IRA - For a married couple with unequal compensation who file jointly, the deduction for contributions on behalf of lower-paid spouse is limited to the lesser of:
      • Full deduction - If neither an individual nor spouse was covered for any part of a year by an employer retirement plan, the individual may take a deduction for total contributions to one or more traditional IRA plans up to:
        • $5,500 ($6,500 if 50 or older), or
        • 100% of individual's compensation.
    • Deduction phaseout - Deduction of traditional IRA contributions for individuals covered by an employer retirement plan are limited, or phased out, depending on filing status and modified adjusted gross income (modified AGI).
      • $5,500 ($6,500 if spouse with lower compensation is 50 or older) or
      • Total compensation includable in gross income of both spouses reduced by:
        • IRA deduction for spouse with greater compensation.
        • Any designated nondeductible contribution made on behalf of spouse with greater compensation.
        • Any contributions to a Roth IRA on behalf of spouse with greater compensation.
      • Deduction phaseout for individual not covered by employer retirement plan but whose spouse is covered by such a plan.
        • Phaseout ranges (For 2013, adjusted annually):
          • Single or head of household: Modified AGI $59,000-$69,000.
          • Married filing jointly or qualifying widow(er): Modified AGI $95,000-$115,000.
          • Married filing separately: $0-$10,000.
      • Nondeductible contributions - Although the deductions for IRA contributions may be reduced or eliminated, contributions still can be made up to general limits.
Roth IRA

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