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What Is A Traditional IRA
A Traditional IRA is an individual retirement account that allows the individual to make contributions with "pre-tax" dollars, up to a specified annual limit determined by the IRS.
What are the Tax Advantages?
Traditional IRA contributions are tax deductible, which means it lowers your taxable income. The savings in taxes, however, aren't realized until the individual files their taxes for the year in which the contributions we're made. The amount of the tax deduction depends on the taxpayer's income and filing status.
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Traditional IRA's are similar to 401(k)'s in that the transactions in the account, including dividends, capital gains, and interest are not subject to tax while in the account, but are subject to earned income tax upon withdrawal.
What are the Maximum Traditional IRA Contribution Limits?
For 2011, the maximum annual contribution for individuals under 50 years of age is $5,000. For those 50 years and older, the maximum annual contribution is $6,000.
Who Can Contribute to a Traditional IRA?
There are no age requirements to participate in a Traditional IRA. However, distributions from the account are not allowed until the individual reaches age 59 and 1/2 without tax penalties. Early withdrawal penalties are 10% plus your current income tax rate. In addition, distributions are required once the individual reaches age 70 and 1/2.
Minimum Income Requirements
The contributions to the traditional IRA can be up to 100% of compensation, up to the annual maximum allowed by the IRS. The individual must have earned the amount of the contribution or more.
Maximum Income Requirements
Traditional IRA deduction amounts depend on whether or not the individual is covered by a retirement plan at their job.
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Posted in Transportation/Automotive Post Date 11/09/2019