Which Individual Retirement Account (IRA) is right for you?
IRAs are a great way for you to save for the future. Your IRA can consist of a range of investments from savings accounts, stocks, bonds, or certificates of deposit. You can contribute up to a certain limit each year into your IRA and if you're over 50, you are allowed an additional "catch up" contribution. The tax advantages of a Traditional or Roth IRA depending on your annual income and whether you are covered by your company's retirement plan. Below is a table to help you understand some of the differences between a Traditional and Roth IRA.
|Overview||This Individual Retirement Account allows contributions to accumulate tax-deferred until withdrawn. This is a great option if you don't have an employer-sponsored retirement plan or want to supplement such a plan.||A Roth IRA provides tax-free withdrawals and non-deductible contributions to the account. Unlike a traditional IRA, a Roth IRA doesn't require you to take distributions and you can continue to contribute after age 70 1/2.|
|Who Can Invest?|
If a spouse is covered by Employer-Sponsored Plan AGI limit for deductibility is $73,000 or less for single status. $218,000 or less for married filing jointly.
If you're not covered by a retirement plan at work, there is no AGI limit for the deduction.
While there are no age limitations, your adjusted gross income (AGI) must be less than $138,000 for single filers and less than $218,000 for 2023 for joint filers.
There is a phase-out of contribution amounts as AGI approaches these upper limits.
|What Are The Tax Advantages?||If you are not an active participant in an employer-sponsored plan, your contributions are fully deductible. If you participate in an employer-sponsored plan, your contributions may be deductible based upon your adjusted gross income. No annual taxes due (tax-deferred) until withdrawn in retirement.||Contributions are not tax-deductible, yet your earnings grow tax-free.|
|Are There Limits On Contributions?||You can contribute $6,500 for 2023; If age 50 or older contributions of $7,500 in 2023 or limited by earned income (whichever is less) can be made.||You can contribute $6,500 for 2023. If age 50 or older contributions of 7,500 for 2023 or limited by earned income (whichever is less) can be made. May be phased out as AGI approaches above upper limits.|
|Is There A Deadline For Account Opening & Contributions?||Opening the account and making contributions for a specific year must be made by the tax filing deadline for that year.||Opening an account and making contributions for a specific year must be made by the tax filing deadline for that year.|
|Do I Pay Taxes On Withdrawals?||Yes. Any withdrawals (except nondeductible contributions) are subject to regular income taxes.||No. All qualified withdrawals are tax-free.|
|Are Withdrawals Required?||Yes, due to the SECURE Act, you do not have to take withdrawals until you reach age 72.||No.|
|When Can I Make Withdrawals?||Withdrawals may incur a 10% penalty with exception of the following: ||Same criteria for Traditional IRA withdrawals, except Roth IRA withdrawals, cannot be taken without penalty until at least 5 years from the date of the first contribution or conversion.|
|What are My Investment Options?||Horizon Bank offers both FDIC insured options such as Certificates of Deposit and non-FDIC options, including stocks and mutual funds, through Horizon Trust & Investment Management.|