Retirement Plans/IRAs < back to Personal Finance Solutions
IRA Basics
An Individual Retirement Account is a personal retirement account that helps individuals save for their own retirements. IRAs offer either tax-deferred or tax-free growth of any earnings*. Some IRAs even provide tax-deductible contributions.
Types of IRAs 
- Traditional IRA — Contributions can be tax deductible and earnings grow tax-deferred. Individuals with earned income can contribute up to $3,000 for the 2004 tax year and up to $4,000 for 2005. Wage earners age 50 and over can also make catch-up contributions.
- Roth IRA — Created as an alternative to traditional IRAs, Roth contributions are not tax-deductible, although any earnings grow tax-free. This means paying taxes now to enjoy tax-free income in retirement. You must meet certain income limits to qualify.
- Spousal IRA — Spousal IRAs are designed to help non-working spouses save for retirement by investing in a traditional or Roth IRA. Couples can contribute up to $6,000 to either type of plan for the 2004 tax year ($7,000 if they are both over age 50, as long as the total IRA contribution is less than their earned income. For 2005 the limit increases to $8,000 ($9,000 if they are both over age 50).
- Rollover IRA — A Rollover IRA is a great way for someone who is changing jobs or retiring to continue to receive the same tax advantages as they had with an employer-sponsored plan like a 401(k). All assets in the plan are simply "rolled over" to an IRA, where any earnings can remain tax-deferred. Plus, an IRA generally offers more investment options and flexibility. You can also "roll over" a number of individual IRAs into one Rollover IRA, if you are interested in simplifying and consolidating accounts.
- SEP IRA — If your employer sponsors a SEP, or Simplified Employee Pension Plan, you may be eligible for a SEP IRA. A SEP is a tax-deferred retirement plan that allows the small business employer to make tax-deductible contributions to SEP IRA accounts for their employees. This plan does not allow for employee contributions, unless the plan was established before 1997.
- SIMPLE IRA — If your employer sponsors a Savings Incentive Match Plan for Employees, or SIMPLE-IRA, you may be eligible to participate. A SIMPLE-IRA is a tax-deferred retirement plan available to self-employed individuals or small businesses (those with fewer than 100 employees) that have no other retirement plan. You and your employer can make contributions, however, the plan must be established by the employer.
Call today for more complete information on IRAs. We can help you determine the best plan to meet your unique situation.
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