Roth or Traditional, Spencer has the right IRA for you The Roth IRA Contributions to a Roth IRA are not deductible, but if the funds are distributed in a Òqualified distribution, they are not subject to federal income tax. Therefore, the earnings on the Roth IRA are generally tax-free. These "tax-free" earnings make the Roth IRA the most exciting new personal saving option since IRAs were permitted in 1975! Contributing to your IRA The annual contribution dollar limit is the same for the Traditional IRA and the Roth IRA. Both allow you to contribute $3,000, or 100% of earned income, whichever is less. You may contribute to both, but not more than $3,000 total per year to the combination of the two. Traditional IRAs allow you to contribute regardless of your income level, and may be deductible, depending on the following criteria: - Whether you or your spouse are considered an active participant in any employer-maintained retirement plan - Your federal income tax filing status - Your modified adjusted gross income (MAGI) - Catch-up contribution of $500 for individuals age 50 and older The Roth IRA reduces and/or limits contributions based on your income level and tax filing status. Contributions to a Roth IRA are not deductible. IRA age limits To contribute to a Traditional IRA, you must be under age 70 1/2 during the entire year for which you are contributing. You may contribute to a Roth IRA regardless of your age. IRA Rollovers You may rollover your Traditional IRA to another Traditional IRA, regardless of your income level. Roth IRAs also allow you to rollover your IRA, regardless of your income level. Distributing your IRA You must begin to take distributions from your Traditional IRA beginning by April 1 of the year following the year you turn 70 1/2. These distributions are fully taxable, except for the return of any nondeductible contributions. There are no age requirements for taking deductions from your Roth IRA. After five years, all Roth IRA distributions are tax-free, including earnings if you are over the age of 59 1/2, disabled, or a first-time homebuyer. Otherwise, only your Roth IRA earnings are taxable, not the contributions. Contributions for your Roth IRA are always distributed before earnings. The IRS 10% early distribution penalty is applied to the taxable portion of distributions from both Traditional and Roth IRAs. In addition, this penalty applies to certain conversion contributions within the first five years, unless you've reached the age of 59 1/2, or if an exception applies. More-->