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IRA Comparison Chart for 2021

  Traditional IRA Deductible Traditional IRA Non-Deductible Roth IRA
Eligibility Must have earned income

Special rules apply for married couples filing separately
Must have earned income

Special rules apply for married couples filing separately
Must have earned income and modified adjusted gross income (MAGI) less than:

Single – $125,000
Partial $125,000 - $140,000

Married filing jointly – $198,000
Partial $198,000 - $208,000

Married filing separately – $0
Partial $0 - $10,000
Contribution
Catch Up (Age 50 or Older)
  • The lesser of $6,000 or 100% of earned income. $12,000 ($6,000 for each spouse) if married filing jointly

  • $1,000
  • The lesser of $6,000 or 100% of earned income. $12,000 ($6,000 for each spouse) if married filing jointly

  • $1,000
  • The lesser of $6,000 or 100% of earned income. $12,000 ($6,000 for each spouse)if married filing jointly

  • $1,000
Deductibility
Not covered by an employer-sponsored plan
Covered by an employer-sponsored plan

Married and one spouse is covered by an employer-sponsored plan
Depends on plan participation
  • Full deduction
Full deduction if MAGI:
  • Single <$66,000
  • Married filing jointly <$105,000
Partial deduction if MAGI between:
  • Single $66,000 - $76,000
  • Married filing jointly $105,000 - $125,000
  • If one spouse is covered by a plan and the other is not, the one who is not has full deductibility if the couple’s MAGI is under $198,000
  • Partial deduction for MAGI $198,000 - $208,000
None None
Tax Benefits
  • Tax deduction
  • Earnings grow tax-deferred and taxed upon withdrawal
  • Earnings grow tax-deferred and taxed upon withdrawal
  • Contributions may be withdrawn tax-and penalty-free at any point

  • Tax-free earnings (see below)
Withdrawal Issues

RMDs
Penalty-free:
  • Age 59½ or
  • First-time home purchase, higher education, active duty military, medical expenses/insurance, Rule 72(t), death, or disability


RMDs starting at age 72*
Non-deductible contributions are withdrawn penalty-free and tax-free, but subject to the pro rata rule upon distribution. Earnings are penalty-free:
  • After age 59½ or
  • First-time home purchase, higher education, active duty military, medical expenses/insurance, Rule 72(t), death, or disability


RMDs starting at age 72*
Roth contributions are withdrawn penalty-free and tax-free. Roth earnings are penalty-free and tax-free if after five years and

  • After age 59½ or
  • First-time home purchase, death, or disability
Considerations
  1. Are you eligible for a deduction based on tax filing status, MAGI, and employer-sponsored plan coverage?
  2. Is your tax rate going to be lower in the future? If yes, paying taxes on IRA distributions at lower rates in the future may be beneficial.
  3. How will taxable RMDs in retirement impact your Medicare premiums and Social Security taxation?
  1. Do you have pre-tax IRA assets (including Traditional, SEP, and SIMPLE IRAs) in addition to this non-deductible contribution? If no, consider converting this non-deductible contribution to a Roth IRA.
  2. Are you aware that earnings on this non-deductible contribution will be pre-tax and subject to ordinary income tax upon withdrawal?
  1. Are you eligible to make a Roth IRA contribution based on tax filing status and MAGI?
  2. How old are you? If you have a longer time horizon until retirement, compounding tax-free earnings in a Roth IRA may be beneficial.
  3. Is your tax rate going to be higher in the future? If yes, having tax-free money in retirement may be beneficial.
  4. Is not being subject to RMDs and giving tax-free money to beneficiaries important to you?

* Please Note: If you reached age 70 ½ in 2019 or prior, your RMDs began at age 70 ½; however, if you reach age 70 ½ in 2020 or after, you may delay your first RMD until age 72. This is due to the enactment of the SECURE Act.

This information is for educational purposes only.

Stifel does not provide tax advice. You should consult with your professional tax advisor regarding your particular situation.

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