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Retirement may seem far away, but it’s never too early to start saving.

Individual Retirement Account (IRA)
A tax-deferred personal savings account allowing you to save for retirement,
without a company-sponsored plan.

But, how does this work?
Throughout your lifetime, you can make tax-deductible “contributions” to your IRA, which can then be invested
in basic securities such as stocks and bonds.

For 2018, the annual amount you can contribute to an IRA is the lesser of 100% of earned compensation, or $5,500.
If you are age 50 or older (as of December 31 of the tax year to which the contribution relates), you are eligible to
contribute an annual “catch-up” contribution each year of up to $1,000.


Traditional Individual Retirement Account (IRA)
Savings account allowing individuals to contribute pre-tax dollars, where investments grow tax-deferred until withdrawal during retirement. Also, the most common type of IRA.

But, How does this work?
Income taxes will be deferred until you withdraw them. You don’t pay annual federal (and, in many cases, state) income taxes on your earnings.

At age 59 1/2, you can make taxable withdrawals from the account called “distributions” for your retirement. If you choose to take distributions before you turn 59 1/2 years old, the government imposes a premature distribution penalty of 10% on your withdrawal.

Additionally, when you turn 70 1/2 years old, you are required to take distributions by April 1 of the calendar year.


Roth Individual Retirement Account (IRA)
An individual retirement account (IRA) that allows qualified withdrawals on a tax-free basis
provided certain conditions are satisfied.

But, How does this work?
Unlike the traditional IRA, contributions to the Roth IRA are considered “after-tax” and therefore not deductible. You can take distributions from the Roth IRA tax-free.

The maximum annual contribution to the Roth IRA for 2018 is $5,500, with an additional $1,000 “catch up” contribution allowed each year for individuals age 50 and older (as of December 31 of the tax year to which the contribution relates).The Roth IRA became an option after the Taxpayer Relief Act of 1997.

This allows for investors filing “single” on their taxes with a modified adjusted gross income in 2018 of less than $132,000. This also includes married couples filing jointly with a combined adjusted gross income of less than $194,000 annually, to make limited, annual contributions toward retirement. There is no mandatory age you are required to take distributions from the Roth IRA, and there is no premature distribution penalty for amounts you withdraw from the principal.


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Savings Incentive Match Plan for Employees (SIMPLE)
A retirement plan that may be established by employers, including self-employed individuals.

In this written salary reduction arrangement, eligible employees contribute to an IRA in their name. Your employer is required to make annual contributions for each eligible participant. This type of arrangement is available to self-employed individuals or owners of companies that have 100 or fewer employees and no qualified retirement plan.

Employees are eligible for a SIMPLE-IRA if they earn at least $5,000 annually.

SIMPLE-IRAs may be funded by annuities.

For 2018, the maximum employee contribution limit is the lesser of 100% of compensation or $12,500. SIMPLE IRA owners age 50 or older (as of December 31 of the tax year to which the contribution relates) may be eligible to make an annual “catch-up” contribution each year of $3,000. The money contributed to a SIMPLE IRA will accumulate tax deferred until money is withdrawn. Withdrawals are subject to ordinary income tax and, if taken before age 59 ½, a 10% federal income tax penalty may apply and this penalty is increased to 25% for distributions taken within the first two years of participation in the plan.

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