IRA
Whether your retirement is 5, 10, or even 30 years away, it's never too soon to think about your retirement security. By opening a Traditional IRA, it's easy to get started on your retirement planning with as little as $250 and up to $4000 ($4500 for those over 50) per year.
- Summary
Our Traditional IRA may be right for you if:
- You are younger than age 70 1/2 with earned income, or you are a non-working spouse
- The ability to deduct contributions is more important than the tax free distributions
- You do not have another IRA, or if you want to split contributions, since the maximum allowed for both Roth and Traditional IRA's is limited to $4000 ($4500 for those over 50) per year
- Tax Deductions
IRA Tax Deductions for Participants & Spouses:
With Traditional IRAs, the maximum income limits for tax deductibility have been raised. This should allow more individuals to deduct IRA contributions even if they participate in a retirement plan at work. For tax year 2005, deductions do not start to phase out until adjusted gross income (AGI) exceeds:
- $50,000 for single filers
- $70,000 for married couples filing jointly
- Another new regulation allows most spouses who do not participate in a company retirement plan to deduct up to their full Traditional IRA contributions...even if their plan-participant spouses cannot. Under the new rule, the nonparticipant spouse's deductions phases out if joint AGI is between $150,000 and $160,000
- Tax Exemptions
Withdrawals Exempt from IRS 10% Penalty Tax:
If you or a family member is buying a home or going to college, you may be able to take advantage of penalty free IRA withdrawals if this will be your first home purchase (lifetime limit of $10,000 per individual) or for qualified higher education expenses, such as college tuition. However, these withdrawals ARE subject to ordinary income tax.
- Rollovers
Rolling Over Your Employer-Sponsored Retirement Plan to a Traditional IRA:
A rollover IRA is a good choice for individuals who are changing jobs or retiring and want to keep their retirement plan growing untouched by taxes. By making a direct rollover from a qualified employer-sponsored plan, you avoid withholding taxes and penalties on the distribution, so more of your money keeps compounding tax-deferred. Withdrawals from the IRA are taxable in the year of receipt and must begin by April 1 of the year following the year you reach age 70 1/2.