Is a Roth or Traditional IRA right for you? We’ll help you decide.
Roth IRA:
No immediate tax breaks, but contributions grow tax-deferred and can be taken out tax-free.
A smart solution if you expect to be taxed at a higher rate when you need to begin withdrawals.
Traditional IRA:
You may receive tax breaks today, depending on your situation. Contributions grow tax-deferred
but are taxed when you take money out in retirement. A smart solution to increase your tax-deferred savings.
|
|
|
|
| Who’s Eligible |
| |
To make a full contribution, you must have a Modified Adjusted Gross Income of:
-
2009: Less than $105,000 if single ($166,000 if married filing jointly)
-
2010: Less than $105,000 if single ($167,000 if married filing jointly)
No age restrictions.
View requirements for full and partial contributions.
|
Anyone with earned income may contribute up to age 70½. |
| Tax advantages |
| Contributions |
Not tax-deductible |
Tax-deductible (subject to certain limitations) |
| Earnings |
Tax-free (subject to certain limitations) |
Taxes are deferred until you begin withdrawing funds. |
| Withdrawals |
Qualified withdrawals are tax-free. |
Taxable |
| Contributions |
| Annual limits |
|
- $5,000; $6,000 if age 50 or older1
|
| Age limit |
No age limit |
Up to age 70½ |
| Withdrawals |
| Tax/penalty consequences |
- Contributions can be withdrawn at any time without taxes or penalties.
- Earnings can be withdrawn without taxes or penalties if you are age 59½ and your account has been open five years or more.2
|
- All earnings and deductible contributions are taxable upon withdrawal.
- Penalties will be assessed if withdrawals are taken before age 59½ or if withdrawals are not taken by age 70½.
|
| Distribution requirements |
None |
Required minimum distributions upon reaching age 70½ |
| Exceptions to penalties |
Some exceptions are made if funds are used for first-time home purchase, education, or certain medical expenses. |
Some exceptions are made if funds are used for first-time home purchase, education, or certain medical expenses. |
| Minimum to open |
| |
$1,000 ($0 if you set up an automatic monthly transfer of at least $100) |
$1,000 ($0 if you set up an automatic monthly transfer of at least $100) |
1. Annual limits are for tax years 2009 and 2010.
2. For Traditional-to-Roth conversions, any converted amounts withdrawn within five years may be subject to taxes and penalties.
3. Other fees apply. Please refer to the
Charles Schwab Pricing Guide for Individual Investors
(“the Guide”) and any amendments to the Guide for comprehensive details on fees.
Once your IRA application is submitted, funding must be completed and the application must be approved before any trading can begin.
©2010 Charles Schwab & Co., Inc. All rights reserved. Member
SIPC.
CS12147-05 (0210-0340) ELC53578 (02/10)