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If an IRA is cashed in before age 59 1/2, what forms need to be filled out?

Regardless of age, the IRA owner will need to file a Form 1040 and show the amount of withdrawal from the IRA. Since the withdrawal was taken before reaching age 59 1/2, unless certain exceptions listed in Publication 590 Individual Retirement Arrangements (IRAs) are met, the IRA owner will need to pay an additional 10 percent tax on early distributions from qualified retirement plans that is reported on Form 1040. A Form 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, may need to be completed and attached to the tax return.

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How much must be taken out of an individual's IRA at age 70 1/2?

Required minimum distributions apply each year beginning with the year the account owner turns age 70 1/2. The required minimum distribution for each year is calculated by dividing the IRA account balance as of December 31 of the prior year by the applicable distribution period or life expectancy. An account owner can determine his or her applicable distribution period or life expectancy by using the Tables in Appendix C of Publication 590. Table I is used by beneficiaries. Table II is for use by owners who have spouses who are both the IRA's sole beneficiary and who are more than 10 years younger than the owner. Table III is for use by all other owners.
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Can an IRA be rolled over into a qualified retirement plan like 401k?

An IRA can be rolled over into a qualified retirement plan, assuming the qualified retirement plan has language permitting such rollovers. You need to check with 401k plan administrator.
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Which IRA is better, Roth IRA or Traditional IRA?

There is no easy answer. Choosing between Traditional IRA and Roth IRA completely depends upon several of factors like

Typically in long run Roth IRA beats Traditional IRA.

Assuming you get 10% average return on your
Roth IRA investment, it is better to go for Roth IRA. Longer the money in Roth IRA, more time for earnings to grow. So eventually your earnings (gains/interest) will be far more than your actual contribution. And real gem of Roth IRA is, earnings are TAX FREE after 59 1/2 yrs!!

For comparison between Roth IRA and Traditional IRA, click here!

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Can I contribute to both Traditional and Roth IRA same time?

Yes! You can contribute to both Roth and Traditional IRAs same time provided total of contributions in both IRAs is not more than maximum contribution allowed for any IRA ($4000).

Maximum contribution allowed for any IRA (Traditional or Roth) is $4000 for year 2006/2007 (age < 50 yrs).

For example: If you contribute $1000 in Traditional IRA, then you can contribute $3000 more in Roth IRA same time that year (2006 or 2007).

Note: For age >= 50 years, additional $1000 can be contributed in IRA.
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How can an individual convert a traditional IRA to a Roth IRA?

A traditional IRA can be converted to a Roth IRA by:

Rollover - A distribution from a traditional IRA can be contributed to a Roth IRA within 60 days after distribution.

Trustee-to-trustee transfer - The financial institution holding the traditional IRA assets will provide directions on how to transfer those assets to a Roth IRA with another financial institution.

Same trustee transfer - As with the trustee-to-trustee transfer, the financial institution holding the traditional IRA assets will provide directions on how to transfer those assets to a Roth IRA. In this case, things should be simpler because the transfer occurs within the same financial institution.

A conversion results in taxation of any untaxed amounts in the traditional IRA. Also, the conversion is reported on Form 8606, Nondeductible IRAs.

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Can I contribute toTraditional IRA when with 401k?

Yes, one can contribute to traditional IRA even if covered by employer 401k plan, but it will be non deductible contribution (No tax deferred).
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