What is a Traditional IRA?
The traditional IRA is an account that allows you to defer taxes on your
earnings until they are withdrawn. Also, certain contributions are
tax deductible in the tax year for which they are made.
Who is eligible to participate
in a Traditional IRA?
Anyone under the age of 70 ½ for the entire tax year and has earned
income (or spouse has earned income) is eligible. You are eligible to
participate even if you already participate in any type of government
plan, tax-sheltered annuity, SEP plan, SIMPLE or qualified retirement
plan established by an employer.
What are some of the features
of a Traditional IRA?
You may contribute any amount up to 100% of your compensation or $2,000,
whichever is less, to a Traditional IRA. However, if you also contribute
to another traditional &/or Roth IRA, your total contribution to
all of these IRA plans cannot exceed $2,000.The deductibility of contributions
is based on whether or not you are an active participant in an employer-maintained
retirement plan. If you are single and not an active participant, you
are eligible for a full ($2,000) deduction no matter how large your income.
If you or your spouse are active participants, the deductible amount
is dependent on your MAGI and income tax-filing status. You may be eligible
for the maximum deduction, a partial deduction, or no deduction. Even
if you are not eligible for a deductible contribution, you can still
make nondeductible contributions to a traditional IRA and take advantage
of the tax-deferred earnings.All earnings in a traditional IRA are tax
deferred until you make withdrawals from the account. Any withdrawals
are taxed as income in the year withdrawn.There is a 10% penalty if funds
are withdrawn prior to the time you reach age 59 ½ with specific
exceptions for disability, medical expenses, health care insurance, home
purchases or higher education expenses. It is extremely important to
review the IRS rules before withdrawing funds prior to reaching age 59 ½.
See us for more information.Funds may be withdrawn without penalty anytime
after you reach the age of 59 ½ years. You must begin to take
out minimum required withdrawals after attaining age 70 ½ years
or severe penalties are imposed.
How do I find out more about
the Traditional IRA?
Simply see any of our IRA representatives. We will explain the nature
of these accounts, your investment options and help you establish your
new Traditional IRA.
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