COMPARE TRADITIONAL VS. ROTH IRAs

Traditional IRA

Roth IRA

Who can benefit the most?

Traditional IRAs benefit people who think their tax bracket may drop in retirement, who may need money before age 59½ to meet college expenses or who plan to buy a first home.

Traditional IRAs may benefit people who want to prepare for retirement or other long-term financial goals. They have two primary advantages:

• Tax-deductible contributions
• Tax-deferred growth

Roth IRAs may benefit people who:

• Think they might be in a higher tax bracket during retirement.
• Want to leave assets to heirs.
• May want to retrieve their original contributions
  before retirement.
• Are age 70½ or older and want to keep putting
  money into an IRA.

 Who is eligible

Anyone with earned income who is under age 70½ can make after-tax (non-deductible) contributions to a Traditional IRA.

To qualify for a deduction of your contributions on your federal tax return, you must meet the income requirements described below.

Anyone with earned income who meets the requirements
described below can make after-tax contributions to a
Roth IRA.

Individuals who are age 70½ or over and have earned income are eligible to make a Roth IRA contribution (and would not be eligible to make a Traditional IRA contribution).

How much you can contribute

For people under age 50:

2008: Contribute up to $5,000.

For people age 50 or over:

2008: Contribute up to $6,000.

Note: You can deduct the full amount from your federal taxes if neither you nor your spouse is an active participant in an employer-sponsored retirement plan.
In order to deduct your full contribution, if you are an active participant in an employer-sponsored retirement plan, your adjusted gross income (AGI) in 2008 must be $53,000 or less for single filers; $85,000 or less for joint filers.

The following phased-out deduction is available:

2008: Individuals earning $53,000 - $63,000.

2008: Joint filers earning $85,000 - $105,000.

For people under age 50:

For people age 50 or over:

2008: Contribute up to $6,000.

Contribution amounts are phased out for single filers
with adjusted gross incomes (AGIs) of $101,000 -
$116,000 for single filers and $159,000 -
$169,000 for joint filers in 2008. If you are married and file separately, you are not eligible for a Roth IRA if your AGI is $10,000 or more.

The following phased-out deduction is available:

2008: Individuals earning $101,000 - $116,000.

2008:  Joint filers earning $159,000 - $169,000

When you can  make withdrawals

Although federal penalties and taxes apply to withdrawals before age 59½, you can take a penalty-free withdrawal at any age to make a qualified first home purchase ($10,000 withdrawal limit) or to meet qualified higher-education expenses.

Additional exceptions also apply.