Roth IRA

Traditional IRA

Who's eligible to invest?

Individuals of any age with earned income, whose adjusted gross income is below $110,000 (single) or $160,000 (joint). Allowed contributions begin to phase out at $95,000 (single) or $150,000 (joint).

Individuals under age 70 ½ who have earned income or whose spouses have earned income.

Maximum annual contribution.

100% of earned income to a maximum of $5,000. Total contributions to combination of Traditional and Roth IRAs cannot exceed $5,000 in one year.

100% of earned income to a maximum of $5,000. Total contributions to combination of Traditional and Roth IRAs cannot exceed $5,000 in one year.

Tax advantage.

Possibility of tax-free investment growth.

Tax-deferred investment growth and possible tax deductions for contributions.

Contribution deductible?

There is no deduction. Contributions are made from after-tax dollars with the benefit of tax-free earnings after five years and attainment of age 59 ½ or other qualified reason.

Possibly. You may generally deduct contributions if you do not have an employer-sponsored retirement plan. You may also deduct them if you have such a plan, and your income is below certain levels. These levels will increase in future years.

Withdrawal of assets.

Contributions may be withdrawn tax free and IRS penalty free any time for any reason. Credit Union penalties may apply. Earnings withdrawn before age 59 ½ may be subject to income tax and penalty tax.

Withdrawals made prior to 59 ½ may be subject to income tax and an additional 10% penalty tax.

Mandatory distributions?

There are no withdrawal requirements or deadlines.

Distributions must start by age 70 ½.

Catch up.

Individuals age 50 or older in 2008 may make an additional catch-up contribution of up to $1000 to their Traditional or Roth IRAs.

Individuals age 50 or older in 2008 may make an additional catch-up contribution of up to $1000 to their Traditional or Roth IRAs.