Which Individual Retirement Account (IRA) is right for you?
IRAs are a great way for you to save for the future. 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|Overview||This Individual Retirement Account allows contributions to accumulate tax-deferred until withdrawn.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 covered by Employer-Sponsored Plan the AGI limit for deductibility is $76,000 (2022 & 2021 for single status. $125,000 2021 & 2020 for married filing jointly. If the spouse is not covered by an employer plan, then AGI limit is $208,000 for 2022 & 2021. If no employer-sponsored plan, there is no AGI limit for the deduction.||While there are no age limitations, your adjusted gross income (AGI) must be less than $140,000 for 2022 & 2021 for single filers and $208,000 for 2022 & 2021 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 No annual taxes due (tax-deferred) until withdrawn in retirement.||Contributions are not tax-deductible, yet your earnings grow tax-free.|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 $6,000 for 2022; the same as 2021; If age 50 or older contributions of $7,000 in 2022 & 2021 or limited by earned income (whichever is less) can be made.||You can contribute $6,000 for 2022; the same as 2021. If age 50 or older contributions of 7,000 for 2022; same as 2021 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.|