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Whatever your retirement goals and needs:
- You're looking for a Traditional , Roth or Educational IRA
- You have funds from a previous employer's retirement plan that you
want to roll into an IRA
- Or, you have funds from several IRA's that you want to consolidate.
Traditional IRA
Take advantage of tax-deferred earnings and possibly yearly deductions.
Who's it for:
- You are a taxpayer under the age of 70 1/2 with earned income, or
you are a non-working spouse.
- Deductible contributions are more important to you than tax-exempt
distributions.
- You would like to supplement your retirement savings in addition to
your employer's retirement plan.
- You do not have another IRA or you want to split contributions
between a Traditional IRA and a Roth IRA.
- The contribution for 2006 is $4,000.00 with the catch-up contribution
limit being $1,000.00.
Learn more about:
- Tax deductions
- Tax deferrals
- Withdrawals and penalties
- Rollover from an employer-sponsored retirement plan
- SEP (Simplified Employee Pension) IRA
- Maximum annual contribution
Tax deductions
Your contribution to a Traditional IRA is fully tax deductible if:
- You and your spouse do not participate in your employer-
sponsored retirement plan at work.
- You do participate in an employer-sponsored retirement plan and
your modified adjusted gross income is under $60,000 as a single
taxpayer or $80,000 as married filing jointly.
- You are not covered by an employer's retirement plan, but your
spouse is, and your joint modified adjusted gross income is no
more than $150,000.00
Tax deferrals
You don't pay taxes on earnings or pre-tax dollars in your IRA until you
begin receiving distributions. The required beginning date to receive
distributions is no later than April 1 following the year in which you reach
age 70 1/2.
Withdrawals and Penalties for IRAs
- Withdrawals with federal additional tax. If you make withdrawals
before age 59 1/2, these withdrawals may be subject to a 10% federal
additional tax and possible state taxes. Bank penalties may apply for
withdrawals from time deposits before maturity.
- Withdrawals without federal additional tax. Under certain conditions,
withdrawals may not be subject to the 10% federal additional tax (for
example, if you take substantially equal periodic distributions for an
extended period, or you or a family member is buying a first home or
going to college). However, the withdrawals are subject to ordinary
income taxes. Bank penalties may apply for withdrawals from time deposits
before maturity.
Rollover from an employer-sponsored retirement plan
A Traditional IRA is a good choice for individuals who are changing jobs
or retiring and want to keep their retirement plan distribution invested and
untouched by taxes. By making a direct rollover from your employer-sponsored
plan, you avoid withholding taxes and penalties on the distribution, so more
of your money keeps compounding tax-deferred.
SEP (Simplified Employee Pension) IRAs
A SEP is one of the most effective ways for business owners (and their
employees) to build their retirement savings. It's a good choice for small
businesses, self-employed individuals, and salaried individuals that operate
a business on the side.
Contributions to a SEP for yourself and your employees are tax-deductible
as a business expense. SEP earnings grow tax-deferred until withdrawals begin.
With taxes deferred, your balance may grow faster, potentially giving you more
than you'd have by investing the same amounts in a taxable investment account.
SEPs allow employers to contribute up to 25% of each participant's annual
compensation or $42,000 whichever is less. The percent you contribute must
be the same for all participating employees.
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