Traditional IRA Facts at a Glance
Traditional IRA Features
Today's Traditional IRA retain some of the best features of all IRA, including:
- Deductible IRA contribution:
For those who meet certain qualifications, annual IRA contributions can be deducted from taxable income, reducing current taxes. If you qualify for the maximum IRA contribution of $4,000 (2005-2007), and $5,000 (2008 and later) in a calendar year, you may be able to deduct that amount from that year's taxable income.
- Tax deferred IRA earnings:
IRA investment earnings are not taxed while they remian in the IRA, helping your savings grow potentially faster. Money that would have gone to the government is reinvested, earning potentially additional returns for you.
Over time, the extra investment earnings can add substantially to the assets in your IRA account. (You pay ordinary income tax on both deductible IRA contributions and investment earnings at the time of withdrawal.)
- Expanded eligibility for IRA deductions:
Many more people can enjoy current tax savings, thanks to more generous eligibility rules. For those who are covered by employer plans, income ceilings are being raised, allowing people with higher incomes to benefit by making deductible IRA contributions.
- Full IRA contributions for spouses:
Couples may also contribute up to $4000 (2006) per year for a spouse who does not earn income. The increase helps non-wage-earning spouses, both male and female, save more for retirement and other designated purposes, and allows families to put as much as $6,000 (2004), $8,000 (2005-2007), and $10,000 (2008 and later) to work each year producing tax-advantaged earnings.
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