FINC 321 Disc ***Professor Anthony***

Jason:

An IRA is an account helping an individual to save for his/her retirement on a tax-deferred basis.

  Traditional IRA:  

· Earnings are tax deferred until the individual withdraws.

· Mostly, the contributions are tax deductible.

· Eligibility is not defined by the income level.

· One can commence withdrawing money from this account as soon as the individual turns 59. Withdrawals before 59 can be taken but with a penalty of 10%.

  Roth IRA:

·  Contributions are not taken as tax deductions

· There are no taxes on withdrawals as well as earnings.

Non-deductible:

· Contributions are not tax-free.

· One can commence withdrawing money from this account as soon as the individual turns 59. Withdrawals before 59 can be taken but with a penalty of 10%.

 

It’s my opinion that they most appealing IRA, is the Roth IRA. I feel that it’s the best option due to its flexibility in financial planning at any time whether it’s prior or during retirement. Also, Contributions are always withdrawn tax-free and earnings are federally tax-free after the five-year aging requirement has been satisfied and certain conditions are met.

Jeff:

The three types of IRAs are:

1. Traditional IRA .  The traditional IRA is an investment option that allows for the contributions to be tax deductible during the year that they are made.  To qualify for this type of IRA, you must not be able to contribute to a retirement plan that is sponsored by your employer.  The earnings of this type of IRA, as well as the contributions are tax deferred until you withdraw the funds.

2.  Nondeductible IRA .   With this type of IRA, the contributions you make to the IRA are taxable as income and can not be deducted for tax purposes when filing.  When it is time to finally withdraw the earnings, you do not pay taxes on them, unlike the traditional IRA.  To qualify for this type of IRA you must have an income that exceeds the limit for the Roth IRA or those who do not meet the eligibility criteria of the Traditional IRA. 

3. Roth IRA .   The contributions to this type of IRA are taxed as income the year hat they are made.  These contributions can not be counted as tax deductions.  The best thing about this type of IRA is that the earnings are not taxable at the time of withdrawal.  You must be age 59 or older to make withdrawals from a Roth IRA.  There are earning limits in order to fully contribute to a Roth IRA.  For a head of household to fully contribute, the earnings must be less than $116,000.  For a married filing jointly, the income must be less than $183,000.

The most appealing type of IRA to me would be the Roth IRA, simply for the benefit of not having to pay taxes on the earnings when I withdrawal them.