Most financial professionals agree that a comprehensive retirement plan should include some sort of employer sponsored retirement plan such as a pension plan or a 401(k). But they should also include your own personal savings plan, including an Individual Retirement Account (IRA).



There are two major types of IRAs available. Different IRAs apply to different circumstances in your career and your financial plan. The advice of a financial professional is crucial in choosing the right one.

Traditional IRA:

-You don't pay taxes on your earnings until the time you withdraw from your account.

-You can contribute up to $4000 a year.

-Over age 50 "catch-up" provision allows you to contribute up to $5000 a year.

-The ability to deduct contributions from your taxes depends on your filing status, adjusted gross income, and whether you're considered an "active participant" in another account.

One of the drawbacks of a Traditional IRA is that you cannot make any more contributions during or after the year you turn 70 ? years old. That same year, you must also start taking required minimum distributions from your account.

There are certain withdrawals you can make from a Traditional IRA without penalties, including qualified higher education expenses. One's ability to deduct contributions to a Traditional IRA

from their income taxes are subject to income limitations. Non-qualified withdrawals made prior to age 59 1/2 will be treated as ordinary income and assessed a 10% penalty. Always check with your financial professional before withdrawing from an IRA.

Roth IRA:

-Contributions are made with after tax dollars.

-The contribution limits and "catch-up" provisions are the same as Traditional IRA.

-Earnings from a Roth IRA will not be taxed when you make qualified withdrawals.

-Contributions are not tax deductible.

-There are no age limits on contributions.

-No required minimum distributions however restrictions on distributions do apply.

Some restrictions do apply to Roth IRAs. If you are married and file a joint tax return, you must make less than $160,000 a year to qualify. If you are married, live with your spouse, and file a separate tax return, you must make less than $100,000 a year to qualify. If you are single and file as the head of household, or married but didn't live with your spouse during the year, you must make less than $110,000 a year to qualify.

The Roth IRA and the Traditional IRA both share many of the same qualities. But even the slightest differences that can make all the difference in the world when deciding which IRA is best for you. There are many more details and much more information available from a financial professional. The added information can help you make the final, fully informed decision as to which IRA suits your retirement plan best.