, disability, medical expenses over 7.5% of AGI, health insurance premiums for certain unemployed individuals, first time home buyer (up to $10,000), higher education expenses, and substantially equal periodic payments. With the Traditional IRA the maximum contribution allowed is the lesser of earned income or $2,000. This contribution is not tax-deductible (smartmoney, the ira super page, 2000). With a Traditional IRA there are required minimum distributions which must begin in the year that the customer turns 70 1/2. The customer may defer the first year’s distribution until April 1 of the following year after they turn 70 1/2; the IRS penalizes 50% of the distribution amount that should have been withdrawn for the year. Also with the Traditional IRA there are certain taxes which become due after a certain age. After age 59 1/2 income tax is due on earnings and the original contributions are withdrawn tax-free (smartmoney, the ira super page, 2000). In 1998 an additional way for individuals to save for retirement was introduced to the public as a Roth IRA. These Roth IRA’s are a terrific tax break, especially for individuals previously shut out of the deductible IRA game because their incomes were too high. Here’s why. Unlike traditional IRA’s, Roth contributions are nondeductible. But the earnings build up tax-free (SmartMoney, you wanted to know, 2000). Another great point about the Roth IRA is the fact that any withdrawals are free of federal income tax under certain circumstances. To be free from federal tax the Roth IRA must have been open at least five years and your age must be 59 1/2 or older. To be eligible for a Roth IRA you must have an adjusted gross income (AGI) between $95,000 and $110,000 for single filers and between $150,000 and $160,000 for joint filers. Also with the IRA you are not able to contribute more than $2,000 annually per person. With the Roth IRA there are no taxes due...
