Individual Retirement Account

Which IRA Is Better?

The question many investors ask is, “Which is better – a traditional IRA or a Roth IRA?” Both have their advantages depending upon your retirement goals. For most people, the bottom line is taxes. Do you want to pay now or pay later in retirement? The answer seems easy – whenever your tax bracket is lower. However, the challenge is guessing what your taxes may be in the future. If you think your taxes will stay the same or be higher, the Roth IRA has the potential for a tax-free earnings advantage. Home Building can help you with any additional questions. Source: The Hartford

Traditional IRA

Features & Contributions

  • Earnings are tax deferred
  • Contributions may be tax deductible1
  • You must have earned income to make a contribution
  • Customers who are age 50 or over may make Catch-Up Contributions
  • Contributions for the previous tax year may be made up to April 15th of the current year
  • Contributions are 100% of earned income or based upon the following table, whichever is less
Tax YearStandard LimitAdditional Catch-Up Contribution LimitTotal Contribution Limit for Age 50 or Over
2009 & after$5,000 + COLA2$1,000 $5,000 + COLA2 + $1,000

Rollovers, Transfers & Distributions

  • Funds from other qualified retirement plans may be rolled over into a Traditional IRA
  • Funds from Traditional IRAs at other institutions may be transferred or rolled over into a Traditional IRA at Home Building
  • Distributions taken prior to the IRA owner reaching age 59½ are generally subject to a 10% IRS penalty
  • IRA owners reaching age 70½ are required to begin taking minimum distributions based upon their life expectancy

Roth IRA

Features & Contributions

  • Earnings are tax-deferred
  • Contributions are not tax deductible
  • Customers reaching age 70½ are not required to take distributions
  • You must have earned income to make a contribution
  • Contributions for the previous tax year may be made up to April 15th of the current year
  • In general, contributions may be made up to 100% of earned income or the amount listed in the following table.
Tax YearStandard LimitAdditional Catch-Up Contribution LimitTotal Contribution Limit for Age 50 or Over
2009 & after$5,000 + COLA2 $1,000 $5,000 + COLA2 + $1,000

Rollovers, Transfers & Conversions

  • Funds from Roth IRAs at other institutions may be transferred or rolled over into a Roth IRA at Home Building.
  • Traditional IRA funds may be converted to a Roth IRA. This transaction may be taxable1
  • Customers reaching age 70½ are not required to take distributions
  • Qualified distributions from a Roth IRA may be tax and/or penalty free
1 Please consult your tax adviser.
2 Cost-of-living adjustments (COLA).

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