Advantages
of Using a Traditional IRA
1.
Contributions to a traditional IRA are fully deductible provided
that the taxpayer has not exceeded certain income limitations
and no employer sponsored retirement plan is available.
2.
All gains on amounts in the plan are tax deferred until the money
is withdrawn.
3.
Contributions can be made after the tax year ends. The deadline
to contribute is April 15th of the next year.
4.
A stay-at-home spouse can make contributions even if he or she
has no earned income.
5.
The Retirement Saver's Credit encourages retirement savings by
allowing a credit based upon a percentage of amounts contributed.
This credit can be for an amount as high as $1,000.
6.
Up to $10,000 can be used for a first-time homebuyer without paying
the early withdrawal penalty.
7.
Up to $10,000 can be used for certain education and other expenses
without paying the early withdrawal penalty.
Disadvantages
of Using a Traditional IRA
1.
All distributions are taxed at ordinary income rates - applicable
at the time funds are distributed.
2.
An owner of an IRA account is required to take a minimum distribution
when he/she reach age 70 1/2. If the required distribution is
not taken, a 50% excise tax may be imposed on the shortfall.
3.
Relatively low maximum contribution amount.
(This information is designed to be of general interest. The specific techniques and information discussed may not apply to you. Before acting on any matter contained herein, consult with your professional advisor.)
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