Don’t Send In Your Taxes Without Taking The IRA Tax Deduction

Having enough money for retirement is something that all adults, regardless of age should be thinking about. Preparing for retirement is much simpler for those individuals that contribute to a Traditional IRA. You have the ability to save a little money over a long period of time to prepare for retirement.

The Traditional IRA retirement plan is readily available to those individuals who meet a couple of specific requirements.

• Those individuals who have surpassed the age of 70 1/2 by the end of the year are no longer eligible to contribute.
• Individuals who do not have a documented source of income, such as wages, bonuses or commissions cannot contribute to the retirement plan.

Traditional IRA’s also have very lucrative tax benefits for those that qualify. Typically any money that you contribute to a traditional IRA is tax deferred. The money that you put into a Traditional IRA is tax deferred. Any money that you put into your fund is not subject to income taxes. You do not pay taxes on the portion of your income that you put into the fund. The money is taxed only after you begin withdrawing. Once you start to withdraw the money it becomes taxable. People are generally in a lower tax bracket and pay less tax. Any money that you elect to put in a Traditional IRA during the year is deductible income on that year’s federal income tax return.

Individuals must make sure to be mindful of the yearly contribution limits.

• Individuals 49 or younger can put in $5,000.

If you are 50 or older you can put in $6,000. If you want to make a deductible contribution for the year, you have until the April 15 income tax deadline to get it in. Contributions that are made the following year but by the April 15 tax deadline can be put on the current year’s income tax forms.

• Before you make a decision about choosing a Traditional or Roth IRA or a 401k plan you should weigh out all of your options.
• For those who expect to be in a lower tax bracket in their retirement years, they benefit by paying less tax on their money.
• Benefits such as the great tax deductions are effective immediately.
• Regardless of your income if you meet the guidelines you can open a Traditional IRA.

There can be some disadvantages to choosing the Traditional IRA over the other plan types.

• If you are eligible for a retirement plan offered by your employer, eligibility requirements then apply to the tax-deductibility rule.
• The Roth IRA allows individuals to withdraw early with no penalties but a Traditional IRA assesses a penalty if you take money out before you are 59 1/2.
• The IRS has the power to seize the money of those individuals that do not start withdrawing at the age of 70 1/2.

Carefully go over each retirement option and find the one that meets your needs. The best way to choose the right retirement plan is to compare each possible option and then choose the one that meets all of your specific needs. The Traditional IRA is generally a good option for most people but individuals always have the ability to explore other retirement plan types.

Confused about the differnce between Roth IRAs and traditional IRAs? To find out about Roth IRA rules, go to: Roth IRA Information.