The Traditional IRA
The Traditional IRA may be most beneficial to those who can fully deduct their contributions from their taxes. For example, contributions may be fully deductible if you are single, or married filing jointly and have no retirement plan in place at work. However, if you already have a retirement plan at work, your contributions to a Traditional IRA may only be partially deductible. Also, the amount of your Adjusted Gross Income (AGI) will determine whether your IRA contributions are fully or partially deductible.
Who can contribute?
Anyone under age 70 ˝ with income from compensation
How much can I contribute?
Total combined contributions to Roth and Traditional IRAs up to $2,000/year or 100% of compensation, whichever is less
Who can make Deductible Contributions?
A single person who does not participate in an employer retirement plan can deduct all contributions, regardless of income.
A single person who participates in an employer retirement plan and has MAGI* of $30,000+ or less can deduct all contributions. The $2,000 maximum deduction is phased out between $30,000-$40,000+ of MAGI*.
A married couple where neither person participates in an employer retirement plan can deduct all contributions, regardless of income.
A married person who participates in an employer retirement plan can deduct all IRA contributions if they file a joint tax return showing MAGI* of $50,000+ or less. The $2,000 maximum deduction is phased out between $50,000-$60,000+ of joint MAGI*.
A married person who does not participate in an employer retirement plan who is married to someone who is in an employer retirement plan can deduct all IRA contributions if the person files a tax return showing MAGI* of $150,000+ or less. The $2,000 maximum deduction is phased out between $150000-$160,000+ of MAGI*.
What are the Tax Advantages?
Earnings compound without tax until withdrawn, usually out earning taxable, non-IRA investments
Contributions may be tax-deductible
Can I Withdraw From The Account?
Withdraw penalty-free for:
qualified educational expenses
first-time home purchase
at age 59 ˝
if you become disabled
qualifying medical expenses (withdrawal of earnings and deductible contributions results in taxable income)
payment to beneficiares at owner’s death
health insurance premiums while unemployed
