IRAs: Individual retirement annuities

Dream retirements don’t come cheap—you need to plan if you intend to enjoy the retirement of your dreams. Inadequate funding is the primary reason why retirement dreams may not come true. But a little planning today can make all the difference tomorrow.

IRAs can be a key component in your retirement planning. There are two basic types—Roth and Traditional. Both provide the benefits of tax-deferred growth and an option for lifetime income that you cannot outlive. The plans do differ, however, and the right plan for you depends on your own situation.

Roth IRAs
A Roth offers tax-free retirement income. Unlike a Traditional IRA, however, not all taxpayers with earned income can fund a Roth. Adjusted gross income (AGI) must be within set limits. Eligibility to contribute to a Roth is phased out for single taxpayers with AGIs between $105,000 and $120,000; and between $167,000 and $177,000 for a married couple filing jointly.

• Contribution limit is $5,000 in tax year 2010.
  
  
• A “catch-up” contribution of $1,000 per year is available to any taxpayer who attains at least age 50 during the tax year. This is added on top of the annual contribution limit.
  
  
• All contributions to a Roth are made with post-tax dollars—no deduction is available.
  
  
• Unlike a Traditional IRA, the principal is available for withdrawal at any time without an IRS penalty or tax ramifications; a surrender charge may apply, however.
  
  

• Tax-free qualified withdrawals of interest are available after five policy years.
  
  

• No mandatory minimum withdrawals after age 70 are required.

Roth IRAs from Harleysville Life are funded with Harleysville's deferred annuity, the Accumulator.

Traditional IRAs
The Traditional IRA remains the only IRA that offers a federal income tax deduction based on certain criteria, making it a key component in many retirement savings plans.

• Contribution limit is $5,000 for tax year 2010.
  
  
• A “catch-up” contribution of $1,000 per year is available to any taxpayer who attains at least age 50 during the tax year. This is added on top of the annual contribution limit.
  
  
• Contributions may be deductible depending on pension participation status and/or adjusted gross income (AGI). Please consult your tax advisor for more information.
  
  
• Mandatory minimum distributions start shortly after turning age 70.
  
  
• Qualified withdrawals are available without an IRS penalty. Please note that while there may not be an IRS penalty, surrender charges may apply in the early years of the contract for certain withdrawals, and interest withdrawn from a Traditional IRA is taxed as current income in the year withdrawn. Amounts withdrawn from an annuity—qualified or otherwise—are considered interest first, then basis.
  
  

• You may be eligible to convert your existing Traditional IRA to a Roth IRA to take advantage of the tax-free retirement income offered by a Roth. The interest accumulated in the Traditional IRA is taxable as ordinary income in the year of conversion.

Traditional IRAs from Harleysville Life are funded with our deferred annuity, the Accumulator.

Rollover IRAs
If you leave your current employer and have funds in a qualified pension plan, you are eligible to “roll over” the funds into a rollover IRA, generally within 60 days, without incurring current income taxes. These funds can remain in the rollover IRA account until it is either transferred to a new qualified retirement plan, or is later distributed as retirement income. Taxes will not be incurred until money is withdrawn.

Rollover IRAs from Harleysville Life are funded with our deferred annuity, the Accumulator.

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