Traditional IRAs

There is no question that the world of retirement and retirement plans is a confusing one. With so many varieties and flavors how does an individual know which one is best for his or her situation? Here are some things to consider.

A Traditional IRA is an excellent supplement to an individual's retirement savings. Making contributions is flexible, so individuals can choose when they want to fund the Traditional IRA. Also, contributions to a Traditional IRA may be tax deductible for eligible individuals, and the earnings can grow on a tax-deferred basis. This means that assets in the Traditional IRA are not taxed until they are withdrawn; the owner can defer paying taxes until retirement, when he or she is most likely in a lower tax bracket. On an amount received during retirement, the owner of the Traditional IRA may pay less tax than on an amount received during pre-retirement years.

Traditional IRAs are a popular way for individuals to save for their retirement because assets can grow on a tax-deferred basis, and contributions to a Traditional IRA are extremely flexible.

Any individual who has taxable compensation during the year and will not reach age 70.5 by the end of the year may establish and fund a Traditional IRA.

Main points:

• Traditional IRAs must be established with institutions that have received IRS approval, such as most banks, brokerages and savings institutions.
• A Traditional IRA can be funded from your own contributions, spousal contributions, transfers or rollovers.
• All IRA participant contributions must be made in cash and cannot be made in the form of securities.
• IRAs cannot invest in collectibles, which include art works, rugs, antiques, metals, gems, stamps, coins, alcoholic beverages and certain other tangible personal property.
• The tax and penalty treatment applicable to distributions from a Traditional IRA is determined by the IRA owner's age at the time of withdrawal and tax-deductibility treatment of the assets when they were contributed.

Eligibility

Traditional IRAs are available for anyone with ordinary income who has not yet reached the year in which they turn 70 ½. However, for those individuals who are participating actively in an employer-sponsored retirement plan, the contributions may not be tax-deductible. There are additional requirements set by the IRS that are based on the filing status and modified adjusted gross income (MAGI) of the individual. See the table below for a summary of the requirements.

If you are covered by your employer's retirement plan and you did not receive any social security retirement benefits...
AND your filing status is...	AND your MAGI is...	THEN you can take...
Single or Head of Household	$52,000 or less	A full deduction
	more than $52,000 but less than $62,000	A partial deduction
	$62,000 or more	No deduction
Married filing jointly or Qualifying Widow(er)	$83,000 or less	A full deduction
	more than $83,000 but less than $103,000	A partial deduction
	$103,000 or more	No deduction
Married filing separately	less than $10,000	A partial deduction
	$10,000 or more	No deduction
If you are not covered by your employer's retirement plan and you did not receive any social security retirement benefits...
AND your filing status is...	AND your MAGI is...	THEN you can take...
Single, Head of Household, or qualifying widow(er)	Any amount	A full deduction
Married filing jointly or separately... with a spouse who is not covered by a plan at work	Any amount	A full deduction
Married filing jointly... with a spouse who is covered by a plan at work	$156,00 or less	a full deduction
	more than $156,000 but less than $166,000	a partial deduction
	$166,000 or more	no deduction
Married filing separately... with a spouse who is covered by a plan at work	less than $10,000	A partial deduction
	$10,000 or more	No deduction
Note: The taxpayer must have earned income (from either self-employment or compensation) equal to or greater than the amount contributed to the IRA. For married couples filing a joint return, either spouse can have earned the required income.
For the most up to date information and/or help determining your eligibility, please contact your tax advisor.

If you are covered by your employer's retirement plan and you did not receive any social security retirement benefits...
AND your filing status is...	AND your MAGI is...	THEN you can take...
Single or Head of Household	$53,000 or less	A full deduction
	more than $53,000 but less than $63,000	A partial deduction
	$63,000 or more	No deduction
Married filing jointly or Qualifying Widow(er)	$85,000 or less	A full deduction
	more than $85,000 but less than $105,000	A partial deduction
	$105,000 or more	No deduction
Married filing separately	less than $10,000	A partial deduction
	$10,000 or more	No deduction
If you are not covered by your employer's retirement plan and you did not receive any social security retirement benefits...
AND your filing status is...	AND your MAGI is...	THEN you can take...
Single, Head of Household, or qualifying widow(er)	Any amount	A full deduction
Married filing jointly or separately... with a spouse who is not covered by a plan at work	Any amount	A full deduction
Married filing jointly... with a spouse who is covered by a plan at work	$159,00 or less	a full deduction
	more than $159,000 but less than $169,000	a partial deduction
	$169,000 or more	no deduction
Married filing separately... with a spouse who is covered by a plan at work	less than $10,000	A partial deduction
	$10,000 or more	No deduction
Note: The taxpayer must have earned income (from either self-employment or compensation) equal to or greater than the amount contributed to the IRA. For married couples filing a joint return, either spouse can have earned the required income.
For the most up to date information and/or help determining your eligibility, please contact your tax advisor.

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