Traditional IRA

For 2007, if you are covered by a retirement plan at work, your deduction for contributions to a Traditional IRA is reduced (phased out) if your modified Adjusted Gross Income (AGI) is:

• More than $83,000 but less than $103,000 for a married couple filing a joint return or a qualifying widow/widower

• More than $52,000 but less than $62,000 for a single individual or head of household

• Less than $10,000 for a married individual filing a separate return.

For 2007, if you are not covered by a retirement plan at work, your deduction for contributions to a traditional IRA may be reduced (phased out) if you either live with your spouse at any time during 2007 or file a joint return for 2007.

If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work (but you are not), your deduction is phased out if your AGI is more than $156,000 but less than $166,000.

If your AGI is $166,000 or more, you cannot take a deduction for contributions to a traditional IRA.

Source: Internal Revenue Service (IRS)

Early Withdrawal Exceptions

In most cases, a withdrawal from a traditional IRA before age 59½ is subject to a 10 percent IRS penalty in addition to ordinary income taxes. However, there are exceptions. These include:

1. To pay for the purchase of a first-time home ($10,000 lifetime cap)

2. To cover expenses for higher education

3. Medical expense payments

4. Health insurance expenses (if account owner is unemployed)

5. Permanent disability of account owner

6. Death of account owner