A Guide To Understand IRA Comparison Charts
Fed up of reading IRA Comparison Charts? And yet confused over what they imply or
suggest? Well, I have tried to compile all the useful information from best of the IRA
comparison charts in this article. It aims to simply a task of choosing the best suited IRA
retirement plan for you. Here it goes.
Of the many types of individual retirement plans available, the major ones are
Traditional IRAs, Roth IRAs, Rollover IRAs, SIMPLE IRAs and SEP IRAs. They differ from each
other in terms of minimum balance, online access, annual maximum contribution, tax
deductible or non-deductible nature of its contribution, taxation on withdrawals, set-up
costs, annual fee, and investment choices. Individuals can open such accounts provided they
meet the eligibility conditions specific to that account.
Briefly, let us see some of the eligibility conditions for different IRA plans. Being a
tax-payer is a pre-requisite for opening any IRA Account. The amount of contribution you
are supposed to make to your IRA depends both on your (and your spouse's) plan and income.
For a Roth IRA account you should be single and earning below $114,000 or your and your
spouse's joint income should be below $166,000. A Rollover IRA account can be opened only
with the distributed funds of an earlier retirement plan (and also if you are switching
jobs). To set up an SEP IRA, you have to be either self-employed or a business of any size.
SIMPLE IRAs are something similar to SEP IRAs but differ in terms of the size of the
business (usually 100 or fewer employees). It is also not for those who are
self-employed.The set-up costs and annual fee differ from institution to institution
and from plan to plan. The crucial difference between the different IRAs is that of tax
treatment on annual minimum contribution that you make, the withdrawals you make and the
distribution of accumulated interest upon maturity. The advantage of Traditional IRAs is
the tax-deductibility of the contributions. However, the withdrawals are taxed according to
federal income tax rules. In contrast, the contributions to a Roth IRA are never
tax-deductible but the permissible withdrawals are tax-free.
Also, you are allowed to make the designated maximum annual contributions if your MAGI
(Modified Adjusted Gross Income) is below a certain notified level. When it exceeds that
level, you cannot make any contributions to your Roth IRA. Rollover IRAs are IRAs which
help you to continuously receive the tax-benefits of the earlier held employer sponsored
retirement plans once they have matured or you have switched employers. The SEP IRA plan is
designed for self employers or firms with a relatively low level of workforce (not more
than 100). The contribution to this account are tax deductible, are limited to 25% of gross
adjusted income or $41,000 or which ever is less.
The list of differences keeps on increasing. Benefits differ from plan to plan and from
firm to firm. You should choose according to your eligibility, your financial situation and
the returns that will come across your way. Because retirement is inevitable, you should
plan for your post-retirement days. The earlier you start getting acquainted with IRA
comparison charts; the better chance you will have to obtain high yields.