Certificates

A tax-deferred retirement savings account funded with before-tax earnings, which means that you'll save money on your taxes as you fund the account during your working years, and then pay taxes, ideally at a lower tax rate, on the funds you withdraw after retirement.

Contributions

A Traditional IRA can be opened by any individual who earns income or receives alimony who is under the age of 70 1/2. The IRS establishes annual limits on IRA contribution amounts that can changes from year to year. All taxpayers age 50 and above will be permitted to make "catch up" contributions of $1,000 to their IRAs. These "catch up" contribution payments may be deductible in a traditional IRA or made to a Roth IRA, if the Manual Adjusted Gross Income (MAGI) limits for regular contributions for the year are met.

Withdrawals

Withdrawals (distributions) from a Traditional IRA are permitted any time after age 59 1/2, but must start by April 1st following the year in which the participant reaches the age of 70 1/2. After age 59 1/2, you may make withdrawals even if you continue to earn income. It is not necessary to be retired in order to make withdrawals.

Penalties

There could be a 10% penalty for withdrawing all or any part of the earnings from a Traditional IRA. Taxable distributions are not subject to the 10% early withdrawal penalty if: the individual is 59 1/2; has died; becomes totally disabled; or is taking equal periodic payments over his or her life expectancy for at least five years or until age 59 1/2, whichever comes later; for college expenses; for a first time home purchase up to $10,000; for certain medical expenses; or certain uses.

Different from traditional IRAs, a Roth IRA is funded with after-tax earnings, so your money grows tax- free. Since you've already paid taxes on the earnings used to fund your Roth IRA, your savings are not taxed when you withdraw your money after retirement.

Contributions

A Roth IRA can be opened by anyone with earned income, regardless of age, when certain adjusted gross income requirements are met. The IRS establishes annual limits on IRA contribution amounts that can change from year to year. IRS Publication 590 at www.irs.gov will provide detailed information regarding specific tax years.

Withdrawals

With a Roth IRA, penalty-free and tax-free withdrawals of your contributions are permitted at any time (until total distributions from all Roth IRAs exceed the contribution amount - no distribution is subject to either taxation or penalty). Tax-free withdrawals of earnings are permitted if you satisfy two conditions. First, the plan must be open a minimum of five successive tax years. Second, the withdrawal must be made after the occurrence of one of the following events: after age 59 1/2, death, total disability, or as a qualified first-time homebuyer (up to $10,000). There is no mandatory age requirement for distributions and funds may remain in the account during the account owner's lifetime.

Penalties

There could be a 10% penalty for withdrawing all or any part of the earnings from a Roth IRA. Taxable distributions are not subject to the 10% early withdrawal penalty if: it is made after the five year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit and, is made on or after the individual is 59 1/2; becomes totally disabled; has died; for college expenses; for a first time home purchase up to $10,000; for certain medical expenses; or certain uses.