Traditional IRAs
Among the various choices for individual retirement arrangements, a traditional individual retirement account (IRA) is a domestic trust or custodial account that can be established by an individual in order to save money for retirement on a tax-deferred basis. Some contributions may also be deducted from your taxable income in the year of contribution (or, in some cases, for the year prior to contribution).
A traditional IRA is an extremely versatile and simple way to save for retirement. It is often used by those with no other tax-favored way to save for retirement. A traditional IRA also serves as the funding method for certain retirement plans, like SEPs and SIMPLEs, used by small business owners and the self-employed. The beauty of an IRA is it is an extremely easy way to save for retirement, with virtually every type of financial institution standing ready, willing, and able to set one up for you.
Anyone who does not reach age 70-1/2 by the end of the year and receives taxable compensation during the year can set up and make contributions to an IRA. Compensation is generally what you earn from working. It includes wages, salaries, tips, commissions, and net income from self-employment. Where spouses are concerned, compensation is pooled between spouses allowing both spouses to set up separate IRAs even if only one spouse is working. Although there is an upper age limit for participation, there is no minimum age requirement, with compensation being the only factor to consider.
Although relatively straightforward, there are a lot of rules involving traditional IRAs that you should be aware of in order to fully benefit from this retirement savings option. Consider the following additional sections:
- IRA Contributions
- IRA Deductions
- IRA Early Withdrawals
- IRA Rollovers
- Mandatory IRA Distributions
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