Retirement Planning & IRAs Request a Quote Choosing the Right IRAChoosing the right IRA is dependent on several factors:your household incomeyour current tax ratethe length of time you plan to hold your investmentsyour estimation of your future investment returnsyour estimated tax rate when you withdraw fundsfuture tax law revisionsBecause every person's situation is different, there isn't one simple answer. You need to compare your choices and decide which is best for you. Your Brown Insurance Group advisor can assist you in reviewing your financial situation.Types of IRAsRoth IRA vs. Traditional IRAThe main difference between a Roth IRA and a Traditional IRA is when you pay taxes. Contributions to a Roth IRA are made from after-tax income. Roth IRA contributions grow tax-free and are not taxed when withdrawn for qualified reasons. These include a first-time home purchase, disability and medical expenses, and any withdrawal taken after age 59-1/2, as long as the account has been open for at least five years. Withdrawals that do not qualify may incur taxes and/or penalties. You may also want to consult a tax professional.Contributions to a Traditional IRA are tax-deductible (subject to certain income limits) and taxes are paid when you withdraw the money. Contributions grow tax-deferred.Simple IRAThe Savings Incentive Match Plan for Employees (SIMPLE) IRA is a tax qualified retirement plan for businesses with fewer than 100 employees. It enables eligible firms to offer 401k-type benefits without complicated rules or high administrative expenses. It enables eligible employees to make tax-deductible contributions beyond what a Traditional or Roth IRA allows.For Businesses, SIMPLE means:No top-heavy rulesNo discrimination testingNo form 5500 filings each yearFully deductible contributions (subject to certain limits)For Individuals, SIMPLE means:Contribution limits far above what a Traditional or Roth IRA allowsComplete investment controlSome level of employer contributionsFull and immediate vesting of employer contributionsRequired employer contributions can be made on either a 3% of compensation ‘elective’ basis or a 2% of compensation ‘non-elective’ basis. SIMPLE contribution limits for individuals are as follows:YearUnder Age 50Over age 50 (catch up contribution)2007$10,500$2,5002008-2010Indexed$2,500SEP IRAA Simplified Employee Pension (SEP) IRA is an easy to set up and easy to administer retirement plan. There are generous funding limits and contributions are fully tax deductible.Because of the plan’s simplicity affordability and flexibility (contributions can be stopped or started at any time) the SEP is great for small businesses, professionals and self-employed people. Certain rules include:Employees cannot contribute personally – only employer contributions are permittedSEP plans cannot discriminate – employees must receive equal percentage contributionsA SEP plan must cover anyone:Who is 21 years old;Who has worked for the employer for 3 of the past 5 years;Who has earned at least $500 for the year.Contributions in 2007 may not exceed 25% of compensation or $45,000, whichever is less. Self-employed individuals may not contribute more than 20% of compensation or $45,000, whichever is less.