Enter your email address to receive Scott Pearson's nationally syndicated investment column for free Enter your email address



Retirement Planning
Traditional IRA

A traditional IRA is a tax-deferred investment account that acts as a personal retirement fund for people with employment income. Contributions may be tax-deductible depending on your adjusted gross income and participation in an employer-sponsored retirement plan. Earnings can grow tax-deferred until withdrawal, thus giving your investments the opportunity to compound faster. At withdrawal, any amounts that have not already been taxed are taxed as ordinary income.

Eligibility
You can open a traditional IRA if you earn income from wages or salary of at least $2000 and you're under the age of 70 1/2.

Contributions
Your maximum IRA contribution per year can be $4,000 or 100% of earned income, whichever is less. Please note your contributions to all IRAs cannot exceed $4,000

Individuals over the age of 50 may be eligible for a $500 annual "catch-up" contribution.


Deductibility
Your contributions are fully tax-deductible if you are:

  • Single and don't participate in your employer's retirement plan OR you do participate and your Adjusted Gross Income (AGI) is $45,000 or under.

  • Married, but neither spouse participates in an employer's retirement plan, OR you do participate and your Adjusted Gross Income is $65,000 or under. (If you are married and only one of you is an active participant in an employer's retirement plan, and joint AGI is less than $70,000, each can deduct up to $5,000. However, if you are married and only one of you is an active participant in an employer-sponsored retirement plan, and your joint agi is less than $150,000 , then the other spouse can deduct a maximum of $3000 in 2004 and $3500 in 2005)  If the spouse is 50 or older, the deductable amount rises to $4000 in 2004 and $4500 in 2005.


If you do participate in your employer’s plan:

Your contributions are fully tax-deductible if you are:

  • Single and your Adjusted Gross Income (AGI) is less than $45,000.
  • Married and, filing jointly, your Adjusted Gross Income is less than $65,000.

Your contributions are partially tax-deductible if you are:

  • Single and your Adjusted Gross Income (AGI) is less than $55,000.
  • Married and, filing jointly, your Adjusted Gross Income is less than $75,000.


Your contributions are NOT tax-deductible if you are:

  • Single, participate in your employer's retirement plan, and your AGI is more than $55,000

  • Married, participate in your employer's retirement plan, and filing jointly your combined income is more than $75,000


All of these numbers are generalizations for informational purposes only.  For more detailed information, consult IRS form 590 at:

http://www.irs.gov/pub/irs-pdf/p590.pdf

Tax Benefits

  • Your contributions grow tax-deferred over the life of your account

  • Up-front tax savings if your contributions are tax-deductible.

  • Upon death, beneficiary's payouts are taxed based on the beneficiary's tax situation.



Withdrawals
You MUST begin taking money from your account at age 70 1/2. Withdrawals are taxable as ordinary income.

You MAY begin penalty-free withdrawals at age 59 1/2. After you are this age, withdrawals are subject to the following tax treatment:

For pre-tax contributions: Both the contributions and the investment earnings are treated as income. For after-tax contributions: The contributions are treated as a nontaxable return of capital, but all investment earnings are treated as income.


The IRA has penalties for withdrawal before age 59 1/2 (early withdrawals). You will owe both the tax due and a 10% early withdrawal penalty on the taxable portion of the withdrawal. There are some EXCEPTIONS to this 10% early withdrawal penalty:

  • You can make penalty-free withdrawals of up to $10,000 for first-time home purchases.

  • Disability (as defined by the IRS)

  • Death

  • Payments for medical insurance for yourself, your spouse, and your
    dependents.

  • Payments for unreimbursed medical expenses that are more than 7 1/2% of your adjusted gross income

  • Withdrawals for qualified higher education costs (for yourself, your spouse, children, or grandchildren
 
Home | About Us | Services | Affiliate | Contact | FAQs
Value View Financial © 2005 | Privacy Policy


EzineArticles Scott EzineArticles Main InteractiveDad Bubble InteractiveDad Buying Home InteractiveDad Identity Theft 2004-ira-contribution-limit.php 2004-ira-contribution.php 2004-maximum-ira-contribution.php 2005-401-k-contribution-limit.php 2005-ira-contribution-limit.php 2005-ira-contribution.php 2005-ira-limit.php 2005-roth-ira-limit.php 2005-top-stock-pick.php 401-k-contribution-limit.php 401k-contribution-limit.php 401k-ira-rollover.php 401k-ira.php 401k-rollover-advice.php 401k-rollover-into-ira.php 401k-rollover-ira.php 401k-rollover-options.php 401k-rollover-plan.php 401k-rollover-rules.php 401k-rollover-to-ira.php 401k-rollover-to-roth-ira.php 401k-rollover.php 401k-rollovers.php advice-on-stock-pick.php asset-management-company.php asset-management-services.php asset-management.php capital-advisor.php capital-asset-management.php capital-management-services.php capital-management.php coverdell-ira.php daily-stock-pick.php diversified-investment-advisor.php education-ira.php educational-ira.php expert-stock-pick.php filenames financial-advice.php financial-adviser.php financial-advisor.php financial-advisory-services.php financial-advisory-svcs.php financial-asset-management.php financial-investment-advice.php financial-investment-newsletter.php financial-investment.php financial-management-service.php financial-management-services.php financial-management.php financial-manager.php financial-newsletter.php free-hot-stock-pick.php free-stock-pick.php get-investment-advice.php hot-stock-pick.php independent-financial-advisor.php individual-retirement-account-services.php individual-retirement-account.php investing-advice.php investing-newsletter.php investment-advice.php investment-advisor.php investment-company.php investment-firm.php investment-guide.php investment-management-advice.php investment-management-company.php investment-management-consultant.php investment-management-firm.php investment-management.php investment-manager.php investment-news.php investment-newsletter.php investment-opportunity.php investment-planning.php investment-portfolio-management.php investment-publication.php investment-research.php investment-securities.php investment-service.php investment-services.php investment.php investor.php ira-account.php ira-contribution-limit.php ira-contribution.php ira-deduction.php ira-distribution.php ira-early-withdrawal.php ira-information.php ira-investment.php ira-limit.php ira-minimum-distribution.php ira-required-minimum-distribution.php ira-rollover.php ira-rollovers.php ira-rule.php ira-transfer.php ira-web-site.php ira-withdrawal-rule.php ira-withdrawal.php ira.php long-term-capital-management.php maximum-ira-contribution.php maximum-roth-ira-contribution.php personal-financial-advisor.php personal-financial-management.php private-capital-management.php registered-investment-advisor.php research-investment-newsletter.php retirement-investment-advice.php retirement-investment.php roth-ira-account.php roth-ira-contribution-limit.php roth-ira-contribution.php roth-ira-distribution.php roth-ira-income-limit.php roth-ira-information.php roth-ira-limit.php roth-ira-maximum-contribution.php roth-ira-rollover.php roth-ira-rule.php roth-ira-withdrawal.php roth-ira.php roth-vs-traditional-ira.php self-directed-ira.php sep-ira.php simple-ira-rule.php simple-ira.php small-cap-stock-pick.php stock-investment-newsletter.php stock-investment.php stock-pick-undervalued.php stock-pick.php top-investment-company.php top-stock-pick.php top-ten-stock-pick.php traditional-ira.php value-stock-pick.php value-stock.php Ezine-Articles-Falling-Knife Ezine-Articles-Effective-Advice Bull-and-Bear-Newsletter-Quote Bull-and-Bear-Newsletter-Pearson Bull-and-Bear-Investment-Column New Generation of Investors Ohio State Diversity Column Samford Listing Wall Street Gurus Stock Exchange USA Bull and Bear Stocks Digest Bull and Bear Digest Recommendation Asta Investor's Value View