Traditional IRA’s Make Attractive Investments
First Time Visitor? Welcome
FinancialLearn.com is dedicated to finding great deals, free stuff, and promote frugal living. We are delighted to have you here.
Sound Fun? Have our articles delivered to you via RSS Feed or E-mail to be reminded of new and upcoming contests and articles.
Traditional IRA’s make attractive investments because you are allowed to contribute 100% of your compensation, up to a specified amount. Contributions might be tax deductible depending on the taxpayer’s income, tax-filing status, and coverage by an employer-sponsored plan.
A traditional IRA can be established by anyone with taxable compensation or self-employed individuals. They must be purchased from a financial institution that has received IRS approval. Compensation eligible for contributions to a traditional IRA include wages, salaries, commissions, bonuses and other amounts paid to individuals for services performed. Taxable amounts received through divorce are also eligible.
The following are not eligible sources of contribution to a traditional IRA: rental income, interest and dividend income, pension or annuity income, deferred compensation, some partnership income and income one can exclude from their income.
An IRA can be funded several different ways: participant contributions, spousal contributions, transfers, and rollovers. For 2005, 2006 and 2007 the contribution limit was $4,000. In 2008 and 2009 the amount will be $5,000. After you reach a certain age you can contribute an additional amount, in addition to the contribution limit, each year. This gives you the chance to catch up on missed contributions.
A popular feature of the traditional IRA is the spousal contribution. An individual may establish and fund an IRA on behalf of his or her spouse, subject to certain guidelines, even if the spouse has little or no income.
The IRS will waive the 10% penalty for early withdrawal of the traditional IRA for the following reasons: un-reimbursed medical expense, to pay medical insurance, for a disability, distributions to the IRA beneficiary, part of an SEPP program, for qualified higher-education expense, and for the purchase of a first home. The rules governing these situations are complicated. It’s always best to consult a professional.
Deciding which type of IRA to invest in depends upon your personal situation and investment needs. Before making a decision, it’s wise to learn all you can about the different types of individual retirement accounts.
Popularity: 18% [?]
Related Posts
- Roth IRA in a Nutshell
- How to Contribute to 401k
- What is a Simple IRA?
- Educational IRA’s
- What is a SEP IRA?
- How to Calculate IRA
- IRA Definitions
