You must have earned income and be under age 70 ½ in the year the contribution is made.
A non-working spouse is also eligible to contribute up to $5,000.
No age limit, you must have a modified adjusted gross income (MAGI) below $120,000 if single or $177,000 if married and filing jointly.
The maximum contribution limit is phased out for those individuals with MAGI between $105,000 and $120,000 (single) and $167,000 and $177,000 (joint).
A non-working spouse is also eligible to contribute up to $5,000.
Maximum contribution
2010: $5,000 annually
2010: $5,000 annually
Catch up contribution
If you are age 50 or older in the year of the contribution, eligible IRA holders can make an additional contribution of $1,000.
If you are age 50 or older in the year of the contribution, eligible IRA holders can make an additional contribution of $1,000.
Tax-deferred growth
Investment growth is tax-deferred.
Investment growth is tax-deferred and all distributions, including earnings on contributions, are tax free if the account has been open for at least five years and certain requirements are met.
Contribution tax deductibility
If neither you nor your spouse is an active participant in an employer-sponsored plan, your entire contribution is tax deductible.
If you are an active participant in an employer-sponsored plan, and (subject to certain phaseout provisions) your MAGI in 2010 does not exceed $66,000 (single) or $109,000 (joint).
Contributions are not tax deductible.
Required distribution
Distributions must begin by April 1 of the calendar year following the year you reach 70 ½.
There is no required date for beginning distributions.
Withdrawal rules
Taxable amounts withdrawn prior to age 59 ½ may be subject to an additional 10% penalty tax.
Premature withdrawals may be subject to federal and state taxes plus a 10% federal tax penalty.
Qualified early withdrawals
Circumstances in which withdrawals can be made penalty free prior to age 59 ½ include:
—IRA owner's death or disability
—substantially equal periodic payments made over life expectancy
—purchase of health insurance while unemployed
—the purchase of a first home (up to $10,000)
—for certain higher educational expenses
Taxes apply to all earnings and all deductible contributions withdrawn.
Withdrawals are tax free if the account is open for at least five years and either
— the withdrawals are made after attaining age 59 ½ —your death or disability
—to purchase a first time home (up to $100,000)
Distributions that are not qualified distributions are included in income to the extent attributable to earnings.
A 10% penalty tax will apply to the taxable portion of the non-qualified distribution unless an exception applies.
Rollovers and transfers
Beginning on January 1, 2010, a rollover of a Traditional IRA to a Roth IRA (conversion) is permitted for all individuals without a MAGI restriction.
When a Traditional IRA is converted to a Roth IRA, taxes must be paid on deductible contributions and all earnings.
Transfers to and from other Traditional IRAs are permitted.
Beginning on January 1, 2010, a rollover of a Traditional IRA to a Roth IRA (conversion) is permitted for all individuals without a MAGI restriction.
When a Traditional IRA is converted to a Roth IRA, taxes must be paid on deductible contributions and all earnings.
Transfers to and from other Roth IRAs are permitted.
Investors should consider the investment objectives, risks, charges, and expenses of a fund carefully before investing. Download a prospectus that contains this and other information about a fund, and read it carefully before investing.
Dreyfus does not provide legal or tax advice. The information contained herein is general in nature and not intended to constitute tax advice.
Since 2006, certain retirement plans have been permitted to allow participants to designate some or all of their deferral contributions as "Roth deferral contributions." Roth contributions may only be rolled over to a Roth IRA.
Traditional IRA owners who convert to a Roth IRA in 2010 will have the option of including the taxable conversion amount in income proportionally over the next two years (2011 and 2012), or including the entire amount in income in 2010.
