Question

Answer

Traditional IRA?

Roth IRA?

#1. Is there an age limit on when I can set up and contribute to a

Yes. You must not have reached age 70½ by the end of the year.

No. You can be any age.

#2. If I earned more than $3,000 in 2004 ($3,500 if I was 50 or older by the end of 2004), is there a limit on how much I can contribute to a

Yes. For 2004, you can contribute to a traditional IRA up to:

·         $3,000, or

·         $3,500 if you were 50 or older by the end of 2004.

There is no upper limit on how much you can earn and still contribute.

Yes. For 2004, you may be able to contribute to a Roth IRA up to:

·         $3,000, or

·         $3,500 if you were 50 or older by the end of 2004,

but the amount you can contribute may be less than that depending on your income, filing status, and if you contribute to another IRA.

#3. Can I deduct contributions to a

Yes. You may be able to deduct your contributions to a traditional IRA depending on your income, filing status, whether you are covered by a retirement plan at work, and whether you receive social security benefits.

No. You can never deduct contributions to a Roth IRA.

#4. Do I have to file a form just because I contribute to a

Not unless you make nondeductible contributions to your traditional IRA. In that case, you must file Form 8606.

No. You do not have to file a form if you contribute to a Roth IRA.

#5. Do I have to start taking distributions when I reach a certain age from a

Yes. You must begin receiving required minimum distributions by April 1 of the year following the year you reach age

70 ½.

No. If you are the owner of a Roth IRA, you do not have to take distributions regardless of your age.

#6. How are distributions taxed from a

Distributions from a traditional IRA are taxed as ordinary income, but if you made nondeductible contributions, not all of the distribution is taxable.

Distributions from a Roth IRA are not taxed as long as you meet certain criteria.

#7. Do I have to file a form just because I receive distributions from a

Not unless you have ever made a nondeductible contribution to a traditional IRA. If you have, file Form 8606.

Yes. File Form 8606 if you received distributions from a Roth IRA (other than a rollover, recharacterization, certain qualified distributions, or a return of certain contributions).