Retirement PlanningTraditional IRAs
This is the simplest way to get started with a tax-deferred product. Depending on how much you earn, you may be able to reduce your tax bill by deducting some or all of your contribution from your Modified Adjusted Gross Income (MAGI). More highlights include:
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Lets you contribute up to $4,000 per year and enjoy tax-deferred growth until withdrawn*
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Your earnings are tax-deferred
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Retirement distributions are taxed at your ordinary income tax rate
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Minimum distributions are required at age 70-1/2
Use this table to find out if you qualify:
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Filing Status
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MAGI** Limits for 1999
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New MAGI** Limits
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Single
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$33,000
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$50,000 by 2005
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Married/Joint
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$53,000
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$80,000 by 2007
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Also, if you're married and do not personally participate in an employee-sponsored retirement plan, you can take a full deduction as long as your combined annual income does not exceed $150,000.
* Combined contributions to Traditional and Roth IRAs cannot exceed $4,000 or 100% of earned income in any given year. Withdrawals prior to age 59-1/2 may be subject to a 10% federal tax for early withdrawal penalty. Penalty may be exempt for certain higher education expenses, and for a qualified first time home purchase (with a lifetime maximum of $10,000).
** MAGI (Modified Adjusted Gross Income)
- What is a Traditional IRA?
- Who is eligible to contribute, and how much?
- Are my contributions tax-deductible?
- When can I withdraw my funds?
- What if I withdraw my funds early?
- Am I required to take distributions?
What is a Traditional IRA?
A Traditional IRA allows eligible individuals to invest up to $4,000 of earned income annually, tax deferred, until age 70 1/2 or until funds are withdrawn. Plus, contributions to Traditional IRAs are tax-deductible for many taxpayers. Over time, these tax benefits can result in significant investment income and growth.
Who is eligible to contribute, and how much?
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Any individual under the age of 70 1/2 who has earned income.
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You may contribute up to a maximum of $4,000 each year in earned income.
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Even if your spouse is not working, you may contribute up to $4,000 per year for your spouse's IRA if your earned income allows it.
Are my contributions tax-deductible?
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The deductibility of your annual contribution depends on your income, marital status and whether you and your spouse receive benefits under an employer's retirement plan.
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For those who are active participants in an employer plan, the ability to fully deduct contributions is limited. The following chart shows the Modified Adjusted Gross Income (MAGI) that can be earned while still allowing a full deduction.
| Tax Year | Married Filing Jointly | Single Filer |
| 1998 | $50,000 | $30,000 |
| 1999 | $51,000 | $31,000 |
| 2000 | $52,000 | $32,000 |
| 2001 | $53,000 | $33,000 |
| 2002 | $54,000 | $34,000 |
| 2003 | $60,000 | $40,000 |
| 2004 | $65,000 | $45,000 |
| 2005 | $70,000 | $50,000 |
| 2006 | $75,000 | $55,000 |
| 2007 | $80,000 | $60,000 |
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Beginning at age 59 1/2 you can start making withdrawals from your Traditional IRA with no IRS penalties. (Fees may apply if breaking terms before account maturity).
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Any earnings and deductible contributions are taxable as ordinary income.
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You can withdraw funds at any time before reaching 59 1/2, but your withdrawal is then subject to a 10% federal early withdrawal penalty and any additional penalties that may apply
- You can withdraw funds at any time before reaching 59 1/2, but your withdrawal is then subject to a 10% federal early withdrawal penalty and any additional penalties that may apply.
- The following exceptions apply to the early withdrawal penalty:
- Disability
- Qualifying medical expenses (under certain conditions)
- Qualifying education expenses
- Unemployment (under certain conditions)
- Qualifying first home purchase
- Death
- Levy
A qualified distribution from a Roth IRA may be withdrawn tax and penalty free* (fees may apply if you are breaking terms before account maturity).
*Certain qualifications apply. Consult your tax advisor for more information.
What if I withdraw my funds early?
Do not change any verbiage on this page (PrimeVest). Already approved by PrimeVest Compliance.
The only exception to this is due to:
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Disability
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Qualifying medical expenses (under certain conditions).
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Qualifying education expenses
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Unemployment (under certain conditions)
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Qualifying first home purchase
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Death
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Levy
Am I required to take distributions?
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Beginning at age 70 1/2, you're required to start taking distributions from your IRA.
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These distributions are based on the contributor's IRA beginning year balance or fair market value divided by his or her life expectancy.
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