Traditional IRAs are primarily tax-deferred retirement plans. Traditional IRA holders are taxed on deductible IRA contributions, plus all earnings, when distributions are taken.

Contributory IRA

The Contributory IRA is the basic IRA to which you can make annual contributions to the lesser of $4,000 or 100% of your compensation. Account holders age 50 or older may contribute an additional catch up contribution. Earnings grow tax-deferred. Contributions may be either deductible or nondeductible depending upon an individual's active participation in an employer-sponsored retirement plan and modified adjusted gross income.

Quick Facts - Contributory IRA

Contributions
Minimum Age to Contribute	None
Maximum Age to Contribute	Year prior to the year in which you turn 70 1/2
Maximum Contribution: Maximum 2007 Contribution Age 50+ Maximum 2008 Contribution Age 50+	As follows: $4,000 $5,000 $5,000 $6,000
Income Maximum - nondeductible contributions	None - Anyone can make nondeductible contributions
Income Maximum - deductible contributions	Depends upon active participation in a QRP and your Modified Adjusted Gross Income:
Not participating in a QRP, filing single Neither spouse participating in a QRP, filing joint	No income limits -- 100% deductible
Active Participant, filing single 2005 Active Participant, filing joint 2005 Active Participant, filing single 2006 Active Participant, filing joint 2006 Nonactive w/Active Spouse, filing joint Active, married filing separate	$50,000 - $60,000 (MAGI) $70,000 - $80,000 (MAGI) $50,000 - $60,000 (MAGI) $75,000 - $85,000 (MAGI) $150,000 - $160,000 (MAGI) $0 - $10,000 (MAGI)
Distributions
Prior to Age 59 1/2	Premature Distribution - 10% penalty unless exception applies Earnings and deductible contributions are taxable
Age 59 1/2+	Regular Distribution - Earnings and deductible contributions are taxable
Required Beginning Date (RBD) - April 1 following the year in which you turn 70 1/2	RBD - 50% penalty if minimum not taken. Taxable Distribution.
Required Minimum Distribution (RMD) - must be taken annually by each Dec. 31st following account holder's RBD	RMD - 50% penalty if minimum not taken. Taxable Distribution.
RMD Calculation:	Previous year-end balance / life expectancy = RMD

SEP IRA

The SEP IRA is an individual IRA that receives Simplified Employer Pension contributions. The election to adopt a SEP Plan is done exclusively by the employer. Under a SEP Plan, each eligible employee must establish a separate SEP IRA account. Once the assets are deposited in the SEP IRA, traditional IRA rules apply. Many individuals make their annual contributions to the same IRA into which their employer makes the SEP contribution.

Quick Facts - SEP IRA

Contributions
Employer Contributions: Maximum deduction	As follows: lesser of 25% of compensation or $45,000 for 2007 lesser of 25% of compensation or $46,000 for 2008
Employee Deferral Contributions	Not allowed
Regular IRA contributions (see Contributory IRA rules Quick Facts)	$5,000 for 2008 with an extra $1000 if age 50 or older
Distributions
Prior to Age 59 1/2	Premature Distribution - 10% penalty unless exception Earnings and deductible contributions are taxable
Age 59 1/2+	Regular Distribution - Earnings and deductible contributions are taxable
Required Beginning Date (RBD) - April 1 following the year in which you turn 70 1/2	RBD - 50% penalty if minimum not taken. Taxable Distribution.
Required Minimum Distribution (RMD) - must be taken annually by each Dec. 31st following account holder's RBD	RMD - 50% penalty if minimum not taken. Taxable Distribution.
RMD Calculation:	Previous year-end balance / life expectancy = RMD

Rollover Holding/Conduit IRA

The Rollover Holding/Conduit IRA is designed to preserve tax benefits for a person who is receiving a distribution from a qualified retirement plan. At some point in the future, funds in this account may be rolled back into another qualified plan as long as the rollover funds have not been tainted (commingled) with non-rollover funds. Since EGTRRA legislation in 2001 many Rollover IRAs are no longer necessary. Federal law now permits funds from a contributory IRA to roll into a qualified retirement plan. Therefore there is no longer a need to keep assets separate.

Quick Facts - Rollover Holding

Contributions
Rollover Holding IRAs Can Accept Annual Contributions If Converted to a Traditional IRA
Minimum / Maximum Age - rollover contributions	None
Distributions
Prior to Age 59 1/2	Premature Distribution - 10% penalty unless exception Earnings and rollover contributions are taxable
Age 59 1/2+	Regular Distribution - Earnings and rollover contributions are taxable
Required Beginning Date (RBD) - April 1 following the year in which you turn 70 1/2	RBD - 50% penalty if minimum not taken. Taxable Distribution.
Required Minimum Distribution (RMD) - must be taken annually by each Dec. 31st following account holder's RBD	RMD - 50% penalty if minimum not taken. Taxable Distribution.
RMD Calculation:	Previous year-end balance / life expectancy = RMD

User Agreement | Privacy Statement | Contact Us | Site Map