What is a Traditional IRA?
A Traditional IRA (Individual Retirement Account) is a personal tax-favored savings account. It allows for tax-deductible contributions for most people. In addition, earnings are not taxed until you begin to withdraw from your IRA.
Who can contribute to a Traditional IRA?
If you are under age 70 1/2, and you or your spouse have earned income, you may contribute to a Traditional IRA, even if you participate in another retirement plan, such as one sponsored where you work. If you are married, both you and your spouse may each have your own IRA; however, you may not have a joint IRA.
How much can I contribute to my Traditional IRA?
Contributions are limited to a specific dollar amount each tax year, depending on your age. For 2017 & 2018, the contribution limit if $5,500 if you are under age 50. For 2017 & 2018, the contribution limit is $6,500 if you are age 50 or older. Contributions may not exceed 100% of your compensation.
When can I make contributions?
Contributions for a year may be made up to the tax filing deadline (usually April 15) for that year, not including extensions. Contributions cannot be made to your Traditional IRA for the year you turn age 70 ½ or for any later late.
Are my Traditional IRA contribution tax-deductible?
Your contributions are fully deductible if, for the year you contribute, you (or you and your spouse) do not actively participate in a retirement plan where you work. If you (or your spouse) do participate in a retirement plan at work, you may be eligible for either a full or a partial deduction based on your tax-filing status and income. If your income exceeds the limits set for that year, no deduction will be allowed.
When can I withdraw money from my Traditional IRA?
You may withdraw money from your Traditional IRA at any time. The taxable portion of the withdrawal will be taxed as ordinary income. Distributions taken before you reach age 59 ½ may be subject to the IRS 10% early withdrawal penalty.
IMPORTANT! – Tax rules can be complicated. This information is intended to serve as a general overview. Before making any decisions, you should speak with a qualified tax advisor.