How A Spousal IRA Fits Into Your Retirement Plan

All adults both young and old should be preparing themselves for life after retirement. A Traditional IRA account makes it easier for you to prepare for retirement. Individuals benefit from the fact that this type of IRA allows them to save up for retirement at their own pace.

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

• In order to be a candidate for the Traditional IRA plan you must have a source of income. A source of income is required for anyone who wants to contribute to a Traditional IRA.
• If you are over the age of 70 1/2, you are no longer eligible to contribute.

Traditional IRA’s also have very lucrative tax benefits for those that qualify. Any money that you put into a Traditional IRA is tax deferred. You do not have to pay income taxes on your Traditional IRA contributions. Money that has been contributed directly to the retirement plan is not taxable income. Your taxable income does not include the money that you put inside the Traditional IRA plan. When you start to withdraw your money at 70 1/2 from the fund, you are then responsible for paying taxes on it. By the time you reach retirement age you are probably in a lower tax bracket which results in less tax. You can deduct your yearly Traditional IRA contributions on your federal tax return.

Traditional IRA plans do have a limit on their yearly contribution amounts.

• Individuals who are 49 0r younger can put in $5,000.

The maximum contribution for those 50 and older is $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. This allows you to deduct your contributions right up until the April 15 tax deadline for that year.

• Generally when people retire they move to a lower tax bracket so they end up paying less tax on their contributions.
• You can participate in a Traditional IRA regardless of your income.
• You can enjoy reaping the tax deduction benefits right away.
• You should think carefully about whether to invest your money in a Traditional or Roth IRA or even a 401k plan.

For some people choosing a Traditional IRA can be a disadvantage.

• Individuals regardless of their needs or wants must begin taking their money out at the age 70 1/2 or the IRS can take part of it.
• Some individuals have a retirement plan available at work and therefore are then subjected to eligibility requirements when they get ready to deduct their contributions.
• If you take your money out before you reach the age of 59 1/2 you are assessed a penalty if you have a Traditional IRA instead of a Roth.

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. Some individuals might go with the Traditional IRA while others prefer to take advantage of all their options and split their money between a Roth IRA and a 401k plan.

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