The Traditional IRA is the most common type
of IRA or individual retirement account. The Traditional IRA is
itself not an investment but an account to hold all your
investments until retirement. Assets in the Traditional IRA
grow tax deferred. You are not taxed on any Traditional IRA
investments until you withdraw the assets from the account.
Traditional IRA Eligibility
Anyone under the age of 70½ with "earned
income" is eligible to SET UP a traditional IRA. Note that
"passive income" such as those from rents and dividends do not
count. Most retired people do not have earned income and are
therefore not eligible to set up a traditional IRA.
Establishment deadline for traditional
You must establish the IRA by tax filing due
date, no extensions.
How to set up Traditional IRA
To set up a traditional IRA, you need to go
to a financial institution such as a brokerage firm or a bank.
You will open up an IRA account at the financial institution
and put money in (contribute) no more than the IRA Contribution
Traditional IRA Fees
All financial institutions will charge you
an annual account fee or custodial fee. This is usually between
$20 and $60. Many financial institutions will waive this fee if
your account balance is above certain level such as
Contributions to Traditional IRA
This is the amount you can deposit in your IRA
Total Contributions to Traditional IRA
100% of compensation or the limit set
by the IRS per individual, whichever is less. Married
couples filing jointly can contribute twice as
much. Separate IRA accounts required; neither IRA can
exceed the total contribution amount per account.
The total IRA contribution limits apply in the
aggregate to both Traditional and Roth IRAs.
Catch Up Contributions for Traditional
Individuals age 50 or over may make
additional catch-up IRA contributions.
Traditional IRA deductible Contribution
An individual who is not an active
participant in an employer plan can make fully deductible
contributions. The deduction is phased out for active
participants whose AGI s exceed certain amounts.
Traditional IRA Deductible Contribution for
Non-Active Plan Participant Spouse
An individual who does not participate in an
employer-sponsored retirement plan but whose spouse does
participate will be eligible to make deductible IRA
contributions, but the deduction is phased out at certain
levels of adjusted gross income.
Traditional IRA Non Deductible
Non-deductible contributions permitted but
the total contribution to the Traditional IRA must not exceed
the amount set by the IRS.
Contribution Deadline for Traditional
Tax filing due date. No extensions.
Contribution Minimum for Traditional IRA
Each financial institution has different
minimums. A common minimum among large brokerage firms is