 |
|
|
| Retirement Savings Options |
It's Easy to Open Both traditional
IRAs and Roth IRAs with the Sierra Club Stock Fund
|
Two Powerful Retirement Savings Tools
Traditional IRAs (Individual Retirement Accounts) and
Roth IRAs currently provide individuals with the ability
to invest as much as $4,000 per year ($8,000 if married
and filing jointly) in pursuit of their retirement objectives.
Traditional IRAs Offer the Power of Tax-Deferred Growth
Depending upon your income, a traditional IRA may allow you to deduct the full amount of your yearly contribution from your taxable income. All the money in your account grows tax-deferred, so it can accumulate faster than if in a similar taxable account.
If neither you nor your spouse participate in an employee-sponsored retirement plan, you can deduct the full amount of your contribution regardless of your income. If you do, your contribution is deductible within the following limits: |
|
|
|
|
Modified Adjusted
Gross Income* |
|
|
|
| Single |
Under $45,000 |
Fully deductible |
|
$45,000 - $55,000 |
Partly deductible* |
|
Over $55,000 |
No deduction
allowed |
|
|
|
| Joint |
Under $65,000 |
Fully deductible |
|
$65,000 - $75,000 |
Partly deductible* |
|
Over $75,000 |
No deduction allowed |
|
|
*See Chapter 1 of IRS Publication
590.
Married couples can make pre-tax IRA contributions up to the yearly limit as long as their Modified Adjusted Gross Income is below $150,000. Taxpayers who do not meet income requirements may still contribute to an IRA using after-tax dollars, and take advantage of the tax-deferred growth of the account.
You can begin to take penalty-free distributions from your account after you reach age 59 1/2. Annual distributions must begin to be taken when you reach age 70 1/2, or you will face IRS penalties. Distribution amounts are determined using an IRS table based on age and marital
status. |
|
|
|
|
|
|
Roth IRAs Allow
Tax-Free Earning and Distributions
While Roth IRAs are not tax-deductible, the account grows tax-free as long as it is open for more than five years from the point at which you make your first contribution (or you reach age 59 1/2). Contributions are made with after-tax income - so when you take money out of your Roth IRA after retirement, it will not be considered taxable income.
You may also make a tax-free distribution if you are disabled or, in certain circumstances, use the proceeds for a first-time home purchase.*
*See IRS Publication 590 for more details.
If you expect to be in a higher income tax bracket when you begin to take distributions from your Roth IRA, you could have higher after-tax income than with a Traditional IRA. In addition, if you participate in an employer-sponsored retirement plan, a Roth IRA may provide more flexibility for your retirement savings. There is no specific age when you must begin taking distributions, making Roth IRAs popular tools for estate planning.
The following table outlines the earning limits to be eligible to contribute to a Roth IRA: |
|
|
|
|
Modified Adjusted
Gross Income* |
|
|
|
| Single |
Under $95,000 |
Full contribution
allowed |
|
$95,000 - $110,000 |
Partial
contribution allowed* |
|
Over $110,000 |
Not eligible |
|
|
|
| Joint |
Under $150,000 |
Full contribution
allowed |
|
$150,000 -
$160,000 |
Partial
contribution allowed* |
|
Over $160,000 |
Not eligible |
|
|
| *See Chapter 1 of IRS Publication
590. |
|
|
|
|
|
|
