Growing Family: Retirement Savings

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You have many expenses when you have children at home, but it’s equally important to start your own retirement savings. A Roth IRA will provide you with a higher rate of interest. Plus, after owning one for five years, all your contributions can be withdrawn tax free.

Traditional IRAs

Tax-deferred growth of earnings.
Maximum annual contribution of $5000 (for 2009) or 100% of compensation, whichever is less, if under age 50.
Maximum annual contribution of $6000 (for 2009) or 100% of compensation, whichever is less, if age 50 or over.
No contributions after age 70 1/2.
Distributions must begin at age 70 1/2.
Deductible contributions.

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Roth IRAs

Tax-free earnings and distributions.
Maximum annual contribution of $5000 (for 2009)or 100% of compensation, whichever is less, if under age 50.
Maximum annual contribution of $6000 (for 2009) or 100% of compensation, whichever is less, if age 50 or over.
Contributions permitted after age 70 1/2.
Distributions not required after age 70 1/2.
Non-deductible, after-tax contributions

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SEP IRAs

Retirement Plan established by an employer.
The employer is allowed to deduct a percentage of the participant's compensation.
SEP contributions are deductible by the employer and are not included in the employee’s income for the year.
SEP contributions are not subject to Federal withholding, FICA or FUTA taxes, unless you are self-employed.
Interest earned on the SEP deposit is sheltered from federal and most state income taxes until withdrawals are made at retirement.

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SIMPLE IRAs

Employee-sponsored retirement plan.
Employer is eligible if it employs 100 or fewer employees.
Employee, by making elective deferrals, can defer current income taxation.
An employee may defer up to $11,500 for 2009 and $10,500 for 2008 (subject to COLA for later years). Employees age 50 or over can make a catch-up contribution of up to $2,500 for 2009 (subject to COLA for later years).
An employer is allowed to deduct the cost of these elective deferrals.
Interest earned on SIMPLE deferrals is sheltered from federal and most state income taxes until withdrawn.
Employer may make matching contributions.

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