Ensuring You Are Aware Of All Pertinent IRA Rules

Age should not be the determining factor when thinking about the future and making retirement plans. A Traditional IRA account makes it easier for you to prepare for retirement. Individuals have the ability to put back a little money at a time for their retirement.

For those who meet the requirements, the Traditional IRA retirement plan can be a very worthwhile option.

• 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.
• 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.

For those that qualify, Traditional IRA’s offer great tax benefits. Contributions to a Traditional IRA are tax deferred. This simply means that you are not responsible for paying taxes at that point for any money that you put into your fund. Taxation begins only at after the individual begins to withdraw their money. By the time you reach retirement age you are probably in a lower tax bracket which results in less tax. Income that is put into a Traditional IRA is considered deductible on the yearly federal income tax.

There is a yearly contribution and deduction limit for Traditional IRA retirement plans.

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

Any individual over the age of 50 can put in $6,000. In order to get your yearly deductions, all contributions must be made by the April 15 tax deadline. Even contributions made the following year can be applied to your income tax if you beat the tax deadline.

• Plan participants do not have to wait long term to see the benefits such as tax deductions.
• Those individuals who expect to be in a lower tax bracket after retirement reap the benefit of paying fewer taxes on their money.
• Go over each of your possible options carefully before you choose to invest in a Traditional or Roth IRA or a 401k plan.
• Regardless of your income you have the opportunity to contribute to Traditional IRA plans.

It is important to note that choosing the Traditional IRA plan over other alternatives can lead to some disadvantages.

• If you do not want your Traditional IRA account to be penalized you must make sure to wait until you are 59 1/2 to withdraw any money.
• The IRS can assess strict penalties on individuals who do not start withdrawing their money by 70 1/2.
• If you are eligible for a retirement plan offered by your employer, eligibility requirements then apply to the tax-deductibility rule.

Each individual needs to sit down and carefully pick a retirement plan that matches their needs. You should pick a retirement plan that fits your specific needs in order to truly benefit. 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.