Traditional IRA

What is a Traditional IRA and What are its Benefits?

Traditional IRAs offer a tax-advantaged approach to accumulating funds for retirement. You may contribute up to $3,000 or 100 percent of earned income, whichever is less, to a traditional IRA annually. This dollar limit is reduced by any contributions you make to a Roth IRA for the same tax year. Benefits include:

Contributions may be tax-deductible, depending on your adjusted gross income (AGI) and whether you participate in a retirement plan at work.
Your potential earnings from your investments can grow on a tax-deferred basis. If your investments increase in value, you won't pay taxes on those earnings until you withdraw them - typically at retirement. Tax-deferred compounding can enhance the growth potential of your money.

Are Traditional IRA Contributions Deductible?

Contributions may be 100 percent tax-deductible, depending on your adjusted gross income (AGI) and whether you or your spouse participates in a qualified retirement savings plan at work. For plan participants, the deduction phases out for AGIs between $32,000 to $44,000 for singles; or between $52,000 to $62,000 for joint filers. If you don't participate in a plan at work but your spouse does, the deduction phases out for a joint AGI between $150,000 and $160,000.

Early Withdrawal Exceptions

In most cases, a withdrawal from a traditional IRA before age 59 is subject to a 10 percent IRS penalty in addition to ordinary income taxes. However, there are exceptions. These include:

Did your IRA originally come from an employer 401k or other retirement plan?
If so, see the Rollover IRA section also.

For more information or to have us answer any questions you may have, please call 1-800-559-2900, or email Atlantic Financial, see our contact Atlantic Financial page, or contact us