Traditional IRA | Retirement Savings Plans

Savings and Social Security alone won't be enough for retirement. A traditional IRA (Individual Retirement Account) is a great way to save money to supplement your retirement income. Even if you're already contributing to your company's 401(k) plan, consider a traditional IRA as the next building block towards building a more comfortable retirement.

Traditional IRAs differ from Roth IRAs in that money going in is pre-tax, so you only pay taxes when you withdraw.

Tax Advantages

IRAs offer certain tax advantages and benefits that can help you now (and later).

  • Tax-deductible contributions - Contributions to a traditional IRA are fully deductible if neither you nor your spouse participates in an employer-sponsored retirement plan (401(k), 403(b) or pension plan).
  • If you or your spouse do contribute to an employer-sponsored retirement plan, the amount you can deduct depends on your adjusted gross income (AGI). Refer to IRS Publication 590 for deduction information, or talk to your financial advisor.
  • Tax-deferred earnings - For all investors, earnings in a traditional IRA are tax-deferred. This means, you do not pay taxes on earnings until you withdraw them.
Contributions

Traditional IRAs are available to all investors (up to age 70½) with earned income at least equal to the amount contributed.

The maximum annual contribution limits are:

 Year Contribution Limit
 2013 $5,500
 2014 $5,500

In addition to the contribution limits, individuals age 50 and over will be able to make "catch-up contributions" of $1,000 per year on top of the annual contribution limit.

Withdrawals
Penalty-free
  • You can withdraw penalty-free after age 59½.
Penalty
  • If you do not start Required Minimum Distribution (RMD) withdrawals by age 70½ you will face a penalty.
  • If you withdraw before age 59½, you will be subject to a 10% penalty. Certain exceptions do apply.
Exceptions to Penalty
  • Higher education costs for you or your family members including tuition, books, supplies and room and board (student must be enrolled at least part time).
  • First-time home purchase expenses ($10,000 lifetime limit) to buy, build or rebuild a first home.
  • Death or disability.
  • Certain medical expenses including qualifying health insurance costs for certain unemployed individuals and un-reimbursed expenses exceeding 7.5% of AGI.
  • Withdrawals made in equal installments over the account holder's life expectancy.

For more information about the traditional IRA, talk to your financial advisor today.   

WEBC012202/01 02/28/02

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