Types of IRAs

An Individual Retirement Account (IRA) is a savings plan that allows you to defer taxes on the income you earn until retirement age.  In certain instances, the money you contribute to an IRA is tax deductible.  Here is an overview of the different types of IRAs.  Before establishing any type of IRA, we encourage you to consult with your tax advisor to ensure that the type of IRA selected by you is appropriate for your circumstances.

Traditional IRA. Contributions can be tax deductible and earnings grow on a tax-deferred basis.  Individuals with earned income can contribute up to $4,000 for 2006.  Wage earners age 50 and over can also make catch up contributions. Learn more about the Traditional IRA.

Roth IRA. The Roth IRA was created as an alternative to traditional IRAs.  Roth IRA contributions are not tax deductible, although any earnings grow on a tax-deferred basis. You must meet certain income limits to qualify for a Roth IRA. Learn more about the Roth IRA.

Spousal IRA. Spousal IRAs are designed to help non-working spouses save for retirement by investing in traditional or Roth IRAs.  Couples can contribute up to $8,000 to either type of IRA for the 2006 tax year ($10,000 if they are both over the age of 50 before 2007) as long as the total IRA contribution is less than their earned income.

Rollover IRA. A Rollover IRA is a great way for someone who is changing jobs or retiring to continue to receive the same tax advantages as they had with an employer-sponsored plan like a 401(k).  All assets in the plan are simply “rolled over” to an IRA, where any earnings can remain tax-deferred.  In addition, an IRA generally offers more investment options and flexibility than a traditional 401(k).  You can “roll-over” a number of individual IRAs into one Rollover IRA, if you are interested in simplifying your accounts. Learn more about Rollover IRAs