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March 7, 2009

Roth IRA Vs Traditional IRA 2009

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Appleby Cheat Sheets ™- Roth Vs Traditional IRA – For tax year 2009
Roth IRA
Traditional IRA
Regular contribution
$5,000
$5,000
Catch-up contribution
$1,000
$1,000
Contribution eligibility (in addition to being required to have eligible compensation/income).
Tax filing Status
MAGI
Allowed amount
Any individual who is under age 70 ½ at the end of the year.
Single
$105,000 or less
100%
$105,000 – $120,000
Partial
$120,000 or more
None
Married filing jointly
$166,000 or less
100%
$166,000 – $176,000
Partial
$176,000 or more
None
Married filing separately
Less than $10,000
Partial
$10,000 or more
None
Contribution deadline
April 15, 2010
April 15, 2010
Deductibility
· For traditional IRAs, contributions are 100% deductible, if the individual is not an active participant, or is married to an active participant.
·The limits shown in the traditional IRA column are for active participants
Contributions are not deductible
Tax filing Status
MAGI
Allowed deduction
Single
$55,000 or less
100%
$55,000 – $65,000
Partial
$65,000 or more
None
Married filing jointly and active
$89,000 or less
100%
$89,000- $109,000
Partial
$109,000 or more
None
Married filing jointly not active, but spouse is active
$166,000 or less
100%
$166,000- $176,000
Partial
$176,000 or more
None
Married filing separately
Less than $10,000
Partial
$10,000 or more
None
Age Limitation
No Age limitation on contributions
No contributions allowed for the year taxpayer attains age 70 ½ and later.
Source of funding
IRA Participant Contributions
IRA Participant Contributions
Rollover and Transfers from other Roth IRAs
Rollover and Transfers from other Traditional IRAs, SEP and SIMPLE IRAs
Spousal IRA contributions
Spousal IRA contributions
Conversions from traditional, SEP and SIMPLE IRAs, non-Roth qualified plans, 401(k) 403(b)s, 403(a) plans and governmental 457(b) plans
Rollovers from non-Roth qualified plans, 401(k), 403(b), 403(a) and governmental 457(b) plans
SEP IRA employer contributions. Financial institution may require account to be SEP-IRA
Tax Credit
Available for Saver’s Tax Credit
Available for Saver’s Tax Credit
Treatment of earnings on IRA investments
Earnings grow on a tax-deferred basis. However, qualified distributions of earnings are tax-free. Non-qualified distributions of earnings are taxable.
Earnings grow on a tax-deferred basis. Earnings are added to taxable income for the year distributed
Distributions Rules
Distributions may be taken at anytime. Distributions will be tax and penalty free if qualified.
Distributions may be taken at anytime. Amounts will be treated as ordinary income, and will be subject to early distribution penalty if withdrawn while under the age of 59 ½ , unless an exception applies
Required Minimum Distribution(RMD)
Owners are not subjected to the RMD rules. Beneficiaries are subjected to RMD rules.
IRA owners must begin taking RMDs, as of April 1 of the year following the year they reach age 70 ½. Beneficiaries are also subject to RMD rules.

See for  Appleby’s IRA Reference Guides more quick tips , question & answers and comparison features on IRAs

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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