Traditional IRAs
A traditional Individual Retirement Arrangement (IRA) offers tax benefits in many cases and can provide financial security when you decide to retire.
Who can contribute, and how much?
If you are under 70 and have earned income from employment, you can contribute up to $5,000. For individuals 50 and older, the maximum contribution is $6,000 for the calendar year 2009.
Are all Traditional IRA contributions tax deductible?
If not covered by a retirement plan at work, you may be eligible to take a tax deduction for the amount contributed to your Traditional IRA. However, if you're covered by an employer's retirement plan, your tax deductible contributions to a Traditional IRA could be limited according to your "modified adjusted gross income" for the calendar year 2009.
Should I contribute if I can't take a deduction?
There are significant benefits to making a Traditional IRA contribution, even if it is not tax deductible. A nondeductible contribution can shelter earnings from taxation until withdrawn. Quite simply, in a lifetime of savings, a taxable non-IRA investment of the same type will not provide the same earnings as nondeductible Traditional IRA contributions. However, the Roth IRA may be more beneficial in many instances.
When can I use my Traditional IRA assets?
Unlike most employer retirement plans in which access is limited to such events as change of employment, plan termination, reaching retirement age, death or disability, access to your Traditional IRA funds is always guaranteed. However, until age 59 there is a ten percent early distribution penalty unless you qualify for exemption.
Am I ever required to take funds from my Traditional IRA?
You are required to take distributions from your Traditional IRA beginning in the year that you turn 70. Failure to take the required minimum distribution will result in a penalty.
