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Traditional and Roth IRAs
Trying to decide between a traditional IRA and a Roth IRA? Remember these basic differences:
- The annual contribution of a traditional IRA is tax deductible (if you qualify), but when you begin to withdraw money, you pay ordinary income tax on your withdrawals.
- The annual contribution to a Roth IRA is not tax deductible, but when you begin to withdraw the money during retirement, you pay no income tax on your withdrawals.
Traditional IRA
- For anyone under 70-1/2 years old with earned income.
- Annual contribution limit is $4,000 or the total of earned income (whichever is less).
- Contributions may be fully or partially tax-deductible or non-deductible, depending on your adjusted gross income.
- All earnings on any contributions are tax-deferred.
- Withdrawals are considered taxable income in the year they are withdrawn.
- Withdrawals before 59-1/2 years of age may incur an IRS early withdrawal penalty.
- Annual withdrawals are mandatory beginning in the year you turn 70-1/2.
- Consult your tax advisor for your specific tax advantages.
Roth IRA
- For anyone with earned income who does not exceed IRS income maximums.
- Annual contribution limit is $4,000 or the total amount of earned income, whichever is less.
- Contributions are not tax-deductible.
- All earnings on any contributions are tax-deferred.
- Withdrawals may be tax-free if money has been on deposit for 5 years or more.
- No withdrawals are required.
- You may contribute part of your money to a Roth IRA and part to a Traditional IRA, but your total contributions can't exceed $4,000 per year or your total earned income, whichever is less.
- Consult your tax advisor for your specific tax advantages.
Education IRA
IRAs aren't just for retirement. If you're like most parents, preparing for your child's education is a difficult task. An Education IRA at OceanFirst can help you take care of part of the burden of paying for your child's education expenses.
- Save for qualified higher education expenses.
- Annual non-deductible contribution up to $2,000.
- Earnings are tax deferred and withdrawals are tax free if these funds are used by the beneficiary for qualified higher education expenses.
- Consult your tax advisor for your specific tax advantages.
Simple and SEP IRAs
If you're a small business owner, OceanFirst can help you take care of your employees' retirement needs -- and your own -- with a Simple IRA or SEP IRA plan. These plans are easy to understand and require minimum paperwork. And of course, you'll get the personal service OceanFirst provides to every customer.
Simple IRA
- An employee can contribute up to 100% of his or her compensation, but not more than $10,000 per year.
- Contributions may be matched by the employer.
- Contributions are immediately fully vested.
SEP IRA
- Employer contributes to the plan the lesser of $42,000 or 25% of annual earned income.
- Contributions are tax-deductible to the employer.
- There is no mandatory contribution, and percentage can vary from year to year.
- All earnings are tax-deferred until withdrawal when Traditional IRA rules apply.
For more information about IRAs or any other OceanFirst products and services, please e-mail us your questions, visit any OceanFirst branch or call 1-888-OCEAN33.
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