What is an IRA?                                                                                                                                                                 

IRA is an acronym for Individual Retirement Arrangement.  They are accounts individuals create save money for retirement.  There many types of IRAs, however, the main two are: roth ira account, traditional ira, roth ira account, traditional ira, roth ira account, traditional ira, roth ira account, traditional ira, roth ira account, traditional ira,

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Tradition IRAs are investment vehicles to defer income tax on your money until you make withdrawals.  When you make withdraws you then pay income tax on the money.  There is a time requirement on when you can make withdraws.  Typically you have to be 59^1/2 to make a withdrawal or you will be charged a 10% penalty.  There are exceptions, you will not face the penalty if:

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• You have unreimbursed medical expenses more than 7.5% of your adjusted gross income

• The distributions are not more than the cost of your medical insurance

• You are disabled

• You are the beneficiary of a deceased IRA owner

• You are receiving distributions in the form of an annuity

• The distributions are not more than your qualified higher education expenses

• You use the distributions to buy, build, or rebuild a first home

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The money you contribute to a Traditional IRA is a tax deductible as long as you don’t have an adjusted gross income above the limits  That means the Federal Government deductions the amount you contribute to the IRA from you income tax.  The tax deductibility availability is tiered, and can be viewed on the IRA limit sheet.

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The advantage of deferring taxes until later is that you have more money in the IRA so that it can compound upon itself and make you even more money for retirement.

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Anybody under the age of 70^1/2 can create an IRA.  At the age of 70^1/2 individuals are required to begin making withdraws from the account.

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• Bob is 45 years old and single.  He earns $75,000 in 2009.  His IRA contribution is limited to $5,000.

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• Jane is unmarried and works part time.  She made $3,100 in 2009.  Her 2009 contribution is limited to $3,100.

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• If you have more than one IRA, the limit applies to the total contributions made to all traditional IRAs.

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Bob and Jane are married and are in their mid 40’s.  Bob’s taxable income in 2008 was $75,000.  Jane’s 2008 taxable income was $3,500.  Bob contributes $5,000 into a Traditional IRA.  If they file a joint tax return, Jane can also contribute $5,000 into her IRA.  The reason is because her contribution limit is based on his income less his contribution.  $70,000 is her contribution limit ($75,000 - $5,000) which means she can contribute to the maximum $5,000.  If they file separate tax returns, than Jane’s contribution would be limited to her income of $3,500.roth ira account, traditional ira, roth ira account, traditional ira, roth ira account, traditional ira, roth ira account, traditional ira, roth ira account, traditional ira, calculator,

Frequently Asked Question roth ira account, traditional ira, roth ira account, traditional ira, roth ira account, traditional ira, roth ira account, traditional ira,

The contribution limit to a traditional IRA for 2009 is the smaller of the following amounts: roth ira account, traditional ira,

• $5,000, ($6,000 if you are age 50 or older) or,

• Your taxable compensation for the year.

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Can I deduct contributions to a Traditional IRA?

Yes.  You may be able to deduct your contributions depending on your income, filing status, whether or not you are covered by a retirement plan at work, and whether you receive social security benefits.  Deductibility can be seen on the IRA limits sheet. roth ira account, traditional ira, roth ira account, traditional ira, roth ira account, traditional ira, roth ira account, traditional ira, roth ira account, traditional ira,