Do You Know Your IRA Investment Options?

All adults should be considering what they need to do in order to be financially secure after retirement. Traditional IRA accounts give all individuals the ability to contribute to a retirement plan. Individuals have the ability to put back a little money at a time for their retirement.

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

• You must have some type of income readily available to contribute to the traditional IRA such as wages from a job, a set salary, bonuses or commissions.
• An individual must be under the age of 70 1/2 at the end of the year or they cannot contribute to a traditional IRA.

It is important to remember that anyone who qualifies for a Traditional IRA also have the opportunity to take advantage of the great tax benefits. It is important to note that any money that you contribute to your Traditional IRA retirement plan is tax deferred. To better understand the benefits, simply remember you do not have to pay taxes on the money you put into the retirement plan. The money is taxed only after you begin withdrawing. Once you start to withdraw the money it becomes taxable. Most people can look forward to falling to a lower tax bracket and paying fewer taxes on your income. Money that you put into the Traditional IRA retirement plan during the year is considered deductible income on the yearly tax return.

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

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

If you are over the age of 50, $6,000 is the max contribution. Individuals who want to deduct their contributions must make sure to contribute by the yearly income tax deadline April 15. You can make contributions during the next year and still count them on your income tax as long as they are by April 15.

• You can also benefit by paying less tax on your money if you anticipate being in a lower tax bracket.
• You can reap benefits such as the tax deduction right away.
• Consider your current needs when trying to decide whether to put your money into a Traditional IRA or a Roth IRA or a 401k plan.
• A Traditional IRA is not based on income requirements.

There are some disadvantages associated with investing in a Traditional IRA.

• Keep in mind that with a Traditional IRA unlike a Roth IRA if you withdraw your money before you reach the age of 59 1/2you are hit with a penalty.
• The IRS can assess strict penalties on individuals who do not start withdrawing their money by 70 1/2.
• If your employer offers you a retirement plan, this can affect the ability for you to make your tax deductions.

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. It may be better for you to stick with a Traditional IRA, or split your money between a Roth IRA and an employer retirement plan.

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