IRA Options

Whether your client is changing jobs, participating in more than one retirement plan, or getting ready to retire and wants the security of guaranteed income, we'll find the perfect IRA that fits the situation. We can help you understand the options available.

Traditional vs. ROTH IRA
SEP vs. SIMPLE IRA

	IRA	Roth IRA
Highlights	A Traditional IRA allows working individuals to contribute earnings toward their retirement. Qualified contributions and their earnings are tax-deferred until withdrawn. An IRA can also be funded for a non-wage earning spouse.	A Roth IRA accepts only non-deductible contributions, but all earnings and subsequent qualified distributions are tax-free. Roth Conversions - Depending on your adjusted gross income, Traditional IRAs, SIMPLE IRAs and SEP IRAs can be converted by paying income taxes (but no tax penalties) on the IRA distribution before rolling over to a Roth IRA.
Age and Income Eligibility	Anyone under age 70½ with annual earned income.	Anyone with an adjusted gross income below: $101,000 (individual) ($105,000 in 2009) $159,000 (Married) ($166,000 in 2009 $ 10,000 (Married filing separately)
Contribution Deductibility	The general contribution limit for 2008 is the lesser of $5,000 ($6,000 if you are 50 or older before the end of the calendar year) or your earned income for the taxable year. These contributions are fully deductible if you and your spouse (if applicable) are not covered by a retirement plan at work. If you or your spouse are covered by a retirement plan, your filing status and AGI will determine if your contributions are deductible.	None.
Tax Advantages	Taxes on gains, dividends & interest are deferred until money is withdrawn¹.	Tax-deferred growth and tax-free qualified withdrawals².
Withdrawals Taxation	Withdrawals are taxed as ordinary income except those that are classed as nondeductible contributions.	Qualified withdrawals include: Attainment of age 59½ Death or disability First-time home purchase (up to $10,000)
Timing	Withdrawals may potentially be taken without penalty in certain situations, including but not limited to: attainment of age 59½ death or permanent disability first-time home purchase ($10,000 lifetime maximum) qualified higher-education expenses substantially equal periodic payments Penalty: Other withdrawals may incur a 10% penalty tax	Withdrawals of earnings are tax-free at any time if they are taken after five years and they are considered qualified.
Required Distributions	Minimum distributions must be taken by April 1 of the year following the year in which the account holder reaches age 70½. Note: To calculate the Required Minimum Distributions, use online RMD calculator, available at www.principaltrust.com	No required distribution starting date or amount until the death of the account holder
Deadline for Contributions	Tax filing deadline for the year of the contribution not including extensions

¹Adjusted Gross Income
	Single Filer		Joint Filer		Married Filing Separately
	Fully Deductible	Partially Deductible	Fully Deductible	Partially Deductible	Partially Deductible
2008	< $53,000	$53,000 - $63,000	< $85,000	$85,000 - $105,000	< $10,000
2009	< $55,000	$55,000 - $65,000	< $89,000	$89,000 - $109,000	< $10,000

²Roth Adjusted Gross Income
	Single Filer		Joint Filer		Married Filing Separately
	Fully Deductible	Partially Deductible	Fully Deductible	Partially Deductible	Partially Deductible
2008	< $101,000	$101,000 - $116,000	<$159,000	$159,000 - $169,000	< $10,000
2009	< $105,000	$105,000 - $120,000	<$166,000	$166,000 - $176,000	< $10,000

	SEP IRA	SIMPLE IRA
Highlights	The Simplified Employee Pension (SEP) IRA is a program that permits employers to make tax deductible contributions on behalf of themselves and their employees without complicated administration and high cost	The Savings Incentive Match Plan for Employees (SIMPLE IRA) permits employers to offer a salary deferral plan to their employees without complicated administration and high cost
Available to	Any employer can establish a SEP. Employers who do not currently maintain any other qualified plans can use IRS Form 5305-SEP to establish a SEP. If the employer maintains another qualified retirement plan they may potentially still establish a SEP but they would have to use either an IRS approved prototype or an individually designed SEP	Employers with 100 or fewer eligible employees and those who generally offer no other tax-advantaged savings plans during the current year
Advantages	Plan documents are simple and easy to administer Flexible contribution percentage from year to year Requires no non-discrimination testing or Form 5500 filings Administration cost is low Note: Compare savings among these plans with the Individual 401(k) calculator at www.principaltrust.com	Includes features of a 401(k) plan, such as salary deferrals, but is easier to administer Requires no top-heavy, non-discrimination testing, or IRS Form 5500 filings Administration responsibilities are few and cost is low
Annual Contributions	Employer discretionary contribution allocated uniformly. Total contributions per employee are the lesser of 25% of compensation or $46,000 for 2008 ($49,000 in 2009) Employees may make their normal IRA contribution to the IRA funding the SEP. These contributions are treated in the same manner as contributions to a traditional IRA	Employer required contribution allocated uniformly using one of two methods: 100% matching contribution on salary reduction contributions up to 3% of compensation, or nonelective contribution for all eligible employees of 2% Employees pre-tax deferrals up to $10,500 ($11,500 in 2009), plus $2,500 catch-up (age 50 and over)
Maximum Employer Deductions	(limited to $230,000 per participant — $245,000 in 2009) not to exceed $46,000 per participant for 2008 ($49,000 for 2009) Note: A self employed individual must make a special computation to figure the maximum deduction for contributions	100% of contributions up to the maximum permissible contribution limits
Deadlines	Established and funded by tax filing deadline, including extensions	SIMPLE IRA plan may be set up on any date between January 1 and October 1 provided the plan sponsor did not previously maintain a SIMPLE IRA plan. If the plan sponsor previously maintained a SIMPLE IRA plan, a SIMPLE IRA may only be set up on January 1. Matching and nonelective employer contributions must be made to the financial institution maintaining the SIMPLE IRA no later than the due date for filing the employer’s income tax return, including extensions, for the taxable year that includes the last day of the calendar year for which the contributions are made.
Maximum Eligibility Requirements	Age 21 with service during at least 3 of the last 5 years, that has received at least $500 for 2008 ($550 in 2009) in compensation from the employer	All employees who received at least $5,000 in compensation from the employer during any two preceding calendar years (whether or not consecutive) and who expect to receive at least $5,000 during the current calendar year are eligible
Vesting	Immediately 100% vested	Immediately 100% vested
Loans	Not available	Not available
Withdrawals	In-service withdrawals permitted, subject to income tax and 10% early withdrawal penalty may apply (see IRA Withdrawals)	In-service withdrawals permitted, subject to income tax and 10% early withdrawal penalty may apply (see IRA Withdrawals) Note: If the withdrawal occurs during the 2-year period beginning on the date on which the individual first participated in and SIMPLE IRA plan maintained by the employer, the 10% penalty may be increased to 25%
Compliance	Annual top-heavy testing required Minimal government reporting required such as, but not limited to, IRS Forms 5498 and 1099-R	Annual Summary Description required Minimal government reporting required such as, but not limited to, IRS Forms 5498 and 1099-R
Calculator	Compare savings among these plans with the Individual 401(k) calculator at www.principaltrust.com