Depending on the type of IRA you choose, contributions may be tax deductible and will grow either tax-deferred or tax-free!
There are two types of IRAs: Traditional versus Roth. The primary difference between a Traditional IRA and Roth IRA is the type of tax benefit each offers.
Traditional IRAs offer tax-deferred growth potential. You make contributions with money you may be able to deduct on your tax return, and any earnings can potentially grow tax-deferred until you withdraw them in retirement. Many retirees find themselves in a lower tax bracket than they were in pre-retirement, so the tax-deferral means the money may be taxed at a lower rate.
Roth IRAs offer tax-free growth potential. You make contributions with money you've already paid taxes on (after-tax), and your money may potentially grow tax-free, with tax-free withdrawals in retirement, provided that certain conditions are met. Since contributions to a Roth IRA are made with after-tax dollars, there is no tax deduction regardless of income.
For more information about the two types of IRAs, including details about eligibility, refer to the chart below.
*Unless IRA owner was born prior to July 1, 1949, then required distributions must begin April 1st of the year following the year they attain age 70½.
Refer to Providence Bank’s Truth in Savings Disclosure for additional account information. Please ask a Personal Banker for current rate information. Information for this chart was obtained from the IRS website. Where language is unclear, assumptions have been made. Investors must consult with their tax advisor or legal counsel for advice and information concerning their particular situation. Representatives of this bank may not give legal or tax advice.
Depending on the type of IRA you choose, contributions may be tax deductible and will grow either tax-deferred or tax-free!
Traditional IRA
Who’s eligible to contribute
Anyone under age 70 ½ who has earned income, regardless of income level. Spouses with one earned income can contribute for both.
Anyone under age 70 ½ who has earned income, regardless of income level. Spouses with one earned income can contribute for both.
Maximum Annual Contributions
2020 - Under 50- $6,000 | 50 and over- $7,000 (including $1,000 catch-up)
2019 - Under 50- $6,000 | 50 and over $7,000 (including $1,000 catch-up)
2020 - Under 50- $6,000 | 50 and over- $7,000 (including $1,000 catch-up)
2019 - Under 50- $6,000 | 50 and over $7,000 (including $1,000 catch-up)
Contribution Restrictions
Yes, if active participant in employer retirement plan. Deductibility may be limited based on modified adjusted gross income (MAGI).
Yes, if active participant in employer retirement plan. Deductibility may be limited based on modified adjusted gross income (MAGI).
Catch-up Contribution Limits
Anyone age 50 and over is eligible to make additional “catch up” IRA contributions of up to $1,000.
Anyone age 50 and over is eligible to make additional “catch up” IRA contributions of up to $1,000.
Contribution Deadlines
IRAs for the taxable year can be opened and funded anytime between the first day of your tax year and the date your tax return is due for the year, excluding extensions. This due date is normally April 15 of the following year.
For 2020, the 2019 tax return deadline was extended to July 15 so prior year contributions may be made until July 15, 2020.
Contributions after age 70 ½
Not Allowed.
Not Allowed.
Tax advantages
Deductible contributions tax-deferred until withdrawal.
Deductible contributions tax-deferred until withdrawal.
Tax Deduction
Yes. Contributions up to the limit are fully tax-deductible if you are not an active participant in a retirement plan. Phaseout rules apply.
Yes. Contributions up to the limit are fully tax-deductible if you are not an active participant in a retirement plan. Phaseout rules apply.
IRS Penalty for Early Withdrawal
None if:
• Over age 59 ½
• Death or Disability
• Qualified Medical expenses
• Qualified college Expenses
• First time home purchase (up to $10,000)
• Due to IRS Levy
See your tax advisor for other distribution expenses options.
None if:
• Over age 59 ½
• Death or Disability
• Qualified Medical expenses
• Qualified college Expenses
• First time home purchase (up to $10,000)
• Due to IRS Levy
See your tax advisor for other distribution expenses options.
Bank Penalty for Early Withdrawal
Standard Bank Early Withdrawal Penalties Apply.
Standard Bank Early Withdrawal Penalties Apply.
Required Distributions
Must begin when participant turns 70 ½.
Must begin when participant turns 70 ½.
Roth IRA
Who’s Eligible to Contribute
As long as you have earned income, you can establish and contribute to a Roth IRA even after age 70 ½. Spouses with 1 income can contribute for both.
As long as you have earned income, you can establish and contribute to a Roth IRA even after age 70 ½. Spouses with 1 income can contribute for both.
Maximum Annual Contributions
2020 - Under 50- $6,000 | 50 and over- $7,000 (including $1,000 catch-up)
2019 - Under 50- $6,000 | 50 and over $7,000 (including $1,000 catch-up)
2020 - Under 50- $6,000 | 50 and over- $7,000 (including $1,000 catch-up)
2019 - Under 50- $6,000 | 50 and over $7,000 (including $1,000 catch-up)
Contribution Restrictions
Contribution may be limited depending on your modified adjusted gross income (MAGI).
Contribution may be limited depending on your modified adjusted gross income (MAGI).
Contribution Deadlines
IRAs for the taxable year can be opened and funded anytime between the first day of your tax year and the date your tax return is due for the year, excluding extension. This due date is normally April 15 of the following year.
IRAs for the taxable year can be opened and funded anytime between the first day of your tax year and the date your tax return is due for the year, excluding extension. This due date is normally April 15 of the following year.
For 2020, the 2019 tax return deadline was extended to July 15 so prior year contributions may be made until July 15, 2020.
Contributions after age 70 ½
Allowed.
Tax Advantages
Qualified withdrawals are tax-free after age 59 ½.
Qualified withdrawals are tax-free after age 59 ½.
Tax Deduction
No deductions for contributions. Tax-free withdrawal replaces this benefit.
No deductions for contributions. Tax-free withdrawal replaces this benefit.
IRS Penalty for Early Withdrawal
None if:
• Over age 59 ½ plus Roth IRA established for at least 5 years
• Death or Disability
• Qualified Medical Expenses
• Qualified college Expenses
• First time home purchase (up to $10,000)
• Due to IRS Levy
See your tax advisor for other distribution expenses options.
None if:
• Over age 59 ½ plus Roth IRA established for at least 5 years
• Death or Disability
• Qualified Medical Expenses
• Qualified college Expenses
• First time home purchase (up to $10,000)
• Due to IRS Levy
See your tax advisor for other distribution expenses options.
Bank Penalty for Early Withdrawal
Standard Bank Early Withdrawal Penalties Apply.
Standard Bank Early Withdrawal Penalties Apply.
Required Distributions
After death of the participant.
After death of the participant.
Refer to Providence Bank’s Truth in Savings Disclosure for additional account information. Please ask a Personal Banker for current rate information. Information for this chart was obtained from the IRS website. Where language is unclear, assumptions have been made. Investors must consult with their tax advisor or legal counsel for advice and information concerning their particular situation. Representatives of this bank may not give legal or tax advice.
