Individual and Spousal IRA

Having enough money for retirement is something that all adults, regardless of age should be thinking about. A Traditional IRA is a retirement account designed to make it easier for individuals to prepare for retirement. This IRA retirement plans give’s individuals the flexibility to save money slowly, in order to make sure they are prepared for their retirement future.

Those individuals who meet the plan requirements are eligible to take advantage of the Traditional IRA retirement plan.

• A Traditional IRA is designed so that all individuals must have a source of income in order to contribute.
• All participants must be under the age of 70 1/2 at the end of the year in order to actively contribute to the IRA.

Great tax benefits are available to those who qualify for a Traditional IRA retirement plan. Contributions made directly to a Traditional IRA are tax deferred. This means that you do not pay any taxes on the portion of your income that you put into the fund. When individuals start withdrawing their money, which can be no later than 70 1/2, their contributions begin to be taxed. At this age most people are in a much lower tax bracket and pay fewer taxes. Money that you put into the Traditional IRA retirement plan during the year is considered deductible income on the yearly tax return.

However, there is a limit to the amount that an individual can contribute and therefore deduct per year.

• $5,000 is the maximum contribution for 49 and younger.

If you are over the age of 50, $6,000 is the max contribution. In order to deduct your contributions on your yearly income tax they must be made by the April 15 deadline of the tax return. You can make contributions during the next year and still count them on your income tax as long as they are by April 15.

• Tax deductions and other benefits are available as soon as you begin to contribute.
• Each person should sit back and consider the benefits of investing a Traditional or Roth IRA or a 401k plan.
• There is no set income limit for Traditional IRA plans.
• Most people see a decrease in their income when they retire and they move to a lower tax bracket which results in lower taxation.

In some cases other plan options may prove to be more advantageous.

• The IRS has the power to seize the money of those individuals that do not start withdrawing at the age of 70 1/2.
• The Traditional IRA retirement plan penalizes any person who withdraws from their account before they are 59 1/2.
• If your employer offers you a retirement plan, this can affect the ability for you to make your tax deductions.

The plan that fits one individual might not be the perfect retirement plan for you, so always compare each plan and choose the best one for you. You may decide to start a Traditional IRA or even split funds between it and a Roth IRA or 401k plan.

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