What is a Traditional IRA? In the past, there was only one IRA. Now there are three. The original IRA was re-named to Traditional IRA. To qualify for a Traditional IRA, you must have earned income (wages) because contributions are based on pre-taxed earnings. If your spouse works, they may qualify for their own Traditional IRA. For married couples filing a joint tax return, a spouse can contribute to a Traditional IRA even if they don't generate income.
The maximum annual contribution to a Traditional IRA is $5,000 per year if you are under 50 years old, $6,000 if you are 50 years old or more. Traditional IRA contributions can be made up to the IRS tax filing deadline, typically April 15th, in which case, the tax benefit would apply to the proceeding year. Contributions can be made up to the age of 70 1/2.
Money invested in a Traditional IRA is pre-tax money. Paying taxes on the money invested and interest earned is defered until money is withdrawn. Withdrawals must begin by age 70 1/2.
Traditional IRA contributions can also be tax deductible if adjusted gross income is up to $50,000 for individuals, or $80,000 for those maried filing a joint return. Limits may be lower for individuals participating in a work related retirement program such as a 401 (K).
Creighton Federal Credit Union offers both free payroll deductions (for employees of participating employees) and direct deposit services to make contributing to your IRA on a regular basis easy and hastle-free.
