Traditional IRA = Benefit today (Deductible) => Taxable tomorrow (also traditional IRA means “TRADITIONAL TAX).
* Withdrawals are fully taxable.
* AGI on the tax return exceeds a threshold amt: $69K for SINGLE and $115K for MFJ
* Even @ the age of 70 is possible to contribute.
ROTH IRA = No benefit today (Non-deductible) => Not Taxable tomorrow.
* Withdrawals after the age of 59.5 are exempt from tax.
* Contributions may not available if AGI exceeds $127K for SINGLE and $188K for MFJ
FOR BOTH PLANS:
* Withdrawals from either type of IRA prior to the age of 59.5 may result in a TAX PENALTY of 10% of the amount withdrawn.
* Penalty does NOT APPLY, when payments of medical expenses exceeding 7.5% of AGI (> or = age of 65) & Payments of qualified higher education costs.
General Rule: If it's tax-deductible going into the IRA, then It's taxable when you withdraw it. And if it's taxable going in (ie: not deductible) it's tax free coming out.
The earning generated from the IRA always accumulate tax-free:
Four Types:
Traditional Deductible IRA: Deductible going in; Principal and Interest taxable coming out
Roth IRA: NOT deductible going in; Principal and Interest tax-free coming out
Non-Deductible IRA: Not deductible going in; Principal not taxable coming out, but interest is taxable coming out
Coverdell Education Fund: not deductible going in, tax-free coming out
Contributions limit:
Single = $5500 per year | Single (age 50+) = $6500 per year
MFJ = $11000 per year | MFJ (age 50+) = $13000 per year
I am also working on it. This is so confusing topic for me.
If I missed something, please correct it.
AUD -
NINJA in Training
BEC - NINJA in Training
FAR - NINJA in Training
REG - NINJA in Training
BEC-78(Expired),68,71,69,74
REG-Waiting for
score
AUD-
FAR-
.
