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:
To pay for the purchase of a first-time home ($10,000 lifetime cap)
To cover expenses for higher education Medical expense payments
Health insurance expenses (if account owner is unemployed) Permanent
disability of account owner Death of account owner
Source: Provided by Idex Funds
Did your IRA originally come from an employer 401k or other retirement plan?
If so, see the Rollover IRA section
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