What is a traditional IRA?
A traditional IRA (An Individual Retirement Account) is a special tax deferred savings plan authorized by the Federal Government to encourage you to accumulate money for retirement.
Do I pay taxes on the earnings?
All the earnings you accumulate in your IRA remain tax deferred until you make withdrawals from the account.
Am I eligible to contribute to an IRA?
Individuals who are under 70.5 years of age for the entire tax year and have earned compensation or received alimony may contribute to a traditional IRA.
How much can I contribute?
The amount of qualified IRA owners are permitted to contribute has risen in 2008. Additional catch-up contributions can be made by qualified individuals over 50. After 2008, the contribution limit will be adjusted annually for inflation with $500 increments. The table below illustrates the maximum contribution limits:
Maximum Contributions Limits
Year Under Age 50 Over Age 50
2007 $4,000 $5,000
2008 $5,000 $6,000
The following figures illustrate the increasing maximum income levels for single filers and couples filing jointly to deduct all or part of their IRA contributions.
Single Person Filing Individually
Maximum Level For Full Maximum Level for Partial
Deduction Deduction
2007 $50,000 $60,000
2008 $50,000 $60,000
Married Couple Filing Jointly
Maximum Level Maximum Level
2007 $150,000 $160,000
2008 $150,000 $160,000
Furthermore, an individual who does not participate in an employer plan, yet their spouse does, may deduct their regular IRA contributions provided their combined adjusted gross income level is below $150,000. They will be allowed a smaller maximum deduction if their combined adjusted gross income is greater than $150,000 provided it is not over $160,000.
Must I contribute every year?
No. You can contribute any time, any amount up to the maximum or none at all.
What is the deadline for opening an IRA?You can open or fund your IRA any time until your federal tax return is due. Normally, April 15 of the following year, excluding extensions.
If you have questions, please contact Sue Wix at 610-526-8631 or mailto:swix@mlhcu.org
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