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An IRA that is not a Roth IRA or a SIMPLE IRA. Individual taxpayers are allowed to contribute 100% of compensation (Self-employment income for Sole proprietors and partners) up to a specified maximum dollar amount to their Traditional IRA. Contributions to the Traditional IRA may be tax-deductible depending on the taxpayer's income, tax-filing status, and coverage by an employer-sponsored retirement plan. Eventual withdrawals are treated as ordinary income and may be subjected to income tax. However, since your income is likely less once you retire, you may be taxed at a lower rate. Contributions
- Minimum Beginning Age ..............................................................................................None
- Maximum Age .............................................................................................................70½
- Maximum amount of contribution the lessor of earned income or:
- Under Age 50:
- Years 2005-2007................................................................................ $4,000
- Year 2008 .......................................................................................... $5,000
- Beyond 2008 ...................................................................................... $5,000 + CPI
- Age 50 or Over:
- Year 2005 .......................................................................................... $4,500
- Years 2006-2007 ............................................................................... $5,000
- Year 2008 ...........................................................................................$6,000
- Beyond 2008 .......................................................................................$6,000 + CPI
- Income limits for deductible contributions (partial deduction within range):
- Inactive participants in a pension plan ................................................................None
- Active participants, filing single. .....................................................$50,000 - $60,000
- Active participants, filing joint. .......................................................$75,000 - $85,000
- Active participants, married filing single. ..................................................$0 - $10,000
- Inactive participant with active participant spouse,
filing joint, joint income ...$150,000 - $160,000
Distributions
- Age at which no penalty is imposed ..............................................................................59½
- Required beginning date April 1 following year became 70½
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Types of IRA's