- A Traditional IRA is a tax-advantaged arrangement that allows earnings and deductible contributions to grow tax-deferred. You can grow your Traditional IRA by not paying income taxes on the earnings and deductible contributions, until you begin making withdrawals. Most Traditional IRA investors tend to make withdrawals after they have retired and are therefore in a lower tax bracket.
How do you determine if this is the right investment plan for you? Some key features of the plan to consider are:
- Earnings grow on a tax-deferred basis and any contributions that you make in a given year may be deducted from your gross income on your Federal Income Tax Return for that year.
- You must not attain the age of 70 ½ during the year you contribute to a Traditional IRA.
- You must have earned income or compensation in order to contribute to a Traditional IRA.
- You must adhere to the annual contribution limits that apply to the combination of all your Traditional and Roth IRAs.
- You are eligible at the age of 50 or older to make additional "catch-up" contributions to your IRA. Over the next several years, the maximum annual contribution amount will increase as shown in the table below:
Additional "catch-up" contributions have been
included in amounts shown for age 50 or older.
After 2010, the IRA limits are currently scheduled to return to the year 2001 levels, although some observers believe that future legislation may continue the increased limits.
If you have any additional questions in regards to Traditional IRAs feel free to contact us so we can help you decide.
