IRAs are a great way to invest for retirement as the earnings on your investment compound on a tax-deferred basis.
Any employed person can contribute to a traditional IRA whether or not they are an active participant in their employer-sponsored retirement plan.
Individuals who are not active participants can generally contribute up to $5,000 or 100% of their income, whichever is less, and when elgible deduct their contribution amount from their annual tax return .
Those who are active participants in an employer-sponsored plan may also be eligible to take advantage of the deduction if their adjusted gross income is below the level established for that tax year.
A non-deductible traditional IRA occurs when an individual is actively participating in an employer sponsored retirement plan but still wishes to contribute to a traditional IRA. In many cases, due to income, they are not eligible to deduct their contributions from their current tax return. However, the earnings on their contribution still accrue on a tax-deferred basis and they are not taxed until they begin withdrawing them or taking them out as income.
$5,000 - 2011 and 2012.
The catch up provision for age 50 and older is $1,000 for 2011 and 2012.
Adjusted Gross Income (AGI)
Contributions to a traditional IRA may or may not be deductible or nondeductible, depending on your age, total income, and whether you are covered by a retirement plan through your employer. For phaseout limits and other restrictions on the deductible portion of your IRA contributions see IRS Publication 590.
MEA Financial Services/Paradigm Equities, Inc. does not give tax or legal advice. The comments regarding the law and tax treatment simply reflect our understanding of current interpretations of such laws. Since laws are always subject to interpretation and possible changes, we recommend that you seek the counsel of an attorney, accountant or other qualified tax advisor regarding these matters as it applies to your particular situation.
MANY TAX PROVISIONS ARE SCHEDULED TO EXPIRE IN 2006 THROUGH 2010 UNLESS EXTENDED OR MADE PERMANENT BY CONGRESS.