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Individual Retirement Accounts

Saving for retirement can be expensive. Just like with other kinds of financial planning, start early. Your money has more time to grow the sooner you begin saving. Remember that different types of retirement accounts provide you with different ways to deposit money, invest money, keep the money earned and even to use the money you accumulate. You may be thinking about opening an Individual Retirement Account, or IRA.

What is an IRA?
Individual Retirement Accounts, or IRAs, are special accounts with tax advantages to help you save for retirement. There are two types of IRAs:

Traditional IRAs let you save money tax-free until you withdraw it. The money you put into the IRA can lower your taxable income and grows tax-free while in the IRA account.
Roth IRAs differ from Traditional IRAs in tax advantages and who can open a Roth IRA. Because the earnings on your contributions are not subject to federal income taxes, a Roth IRA may benefit you.

Traditional IRAs versus Roth IRAs
Below is a quick reference chart to help you compare traditional and Roth IRAs. To learn more about these and other IRA options, you can visit AARP's IRA Help Center.

If you’d like to talk to a VCB account specialist about IRA accounts, call (703) 534-0700 or use our locator to find the branch most convenient for you and to experience VCB’s outstanding customer service.

	Traditional IRA		Roth IRA
Eligibility	Individuals with earned income under age 70 1/2 at the end of the calendar year. Non-working spouses may also be eligible.		No age restrictions to open. Fully eligible if income below $95,000 (single) or $150,000 (joint). Increasing limits apply if income is higher; not eligible if income is above $110,000 (single) or $160,000 (joint).
Contributions	May be tax deductible. Reduces gross taxable income for that year by the amount contributed.		Never tax deductible.
Tax Benefits of Contributions	Fully deductible if you don't have an employer retirement plan. Nondeductible if you're covered by an employer retirement plan and have a modified adjusted gross income above $60,000 (single) $85,000 or $160,000 (married filing joint, and depending on who has a retirement plan at work).		Not deductible. If converting from IRA to Roth IRA, the taxable portion of the IRA is taxed in year of conversion.
Maximum Contribution (per individual)	Tax Year: 2008 2009 Tax Year: 2008 2009	Under age 50: $5,000 $5,000 Over age 50: $6,000 $6,000	Same (but if you have both an IRA and a Roth IRA, the total contributions can't exceed limits shown at left).
Rollovers	No annual limit on amount rolled over from another qualified plan		Same
Conversion			May convert from IRA to Roth IRA if income is $100,000 or less.
Earnings/Withdrawals	Untaxed until withdrawn.		All qualified distributions after age 59 1/2 are untaxed. Could incur penalty if not in account for at least 5 years.
Distributions	Must begin distributions by April 1 in year after turning 70 1/2. May begin distributions after age 59 1/2. If distribution is less than minimum annual requirement, you incur penalty of 50% of amount that should have been distributed.		No distribution requirements, except in case of death.
Distributions before age 59 1/2	Generally taxable and subject to 10% early withdrawal penalty; the following exceptions apply: $10,000 not penalized (but taxable) if withdrawn for first-time home purchase. Full amount taxable but not penalized for certain other situations.		Earnings generally taxable and subject to 10% early withdrawal penalty; the following exceptions apply: $10,000 not penalized (but taxable if in account for less than 5 years) if withdrawn for first-time home purchase. Any earnings taxable but not penalized for certain other situations.