What is a Traditional IRA?

Answer:
A Traditional IRA (Individual Retirement

Account) allows you to deposit funds (a portion of your earnings) that will grow tax-deferred. You don’t pay income taxes on the earnings or contributions until you begin withdrawing the funds, usually after your retire. Funds withdrawn are subject to federal income tax.

To be eligible for a Traditional IRA, you must have earned income so that you can contribute to an IRA. Also, you must not reach age 70 ½ during a year you contribute to an IRA.

In 2008, annual contribution limits can be $5,000 or 100% of your earned income, whichever is less. If your spouse has earned income, they can also make contributions. (Contributions limits apply to your combined Traditional IRA and your Roth IRA.)

Depending on your age, you may be allowed to make additional contributions which are considered “catch-up” contributions.

Always check with your financial advisor or tax-attorney to make sure your contributions are appropriate for your personal situation.


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