IRA
IRA or traditional ira OR Individual Retirement Account
Any one can set up and ira who have taxable income and have not turned out to be aged 701/2 by the end of the year.No tax at contribution. Accumulate interest dividend and capital gains are tax deferred until withdrawn. Till 1990 ira was the only choice. Then Roth ira was created. There is no income restriction. Ira is available to every one.IRA allows you to contribute up to $4000 per yearin 2005, if you are under 50. If you are 50 or older, you can contribute $ 500 more as catch up contribution or Your taxable compensation for the year.
Anyone can contribute to an IRA if they have earned income for the year at least equal to the amount of the contribution. The maximum contribution will rise to $5000 by 2008. Those who reached 50 years of age by the end of 2002 can make additional "catch up" contributions of $500 through 2005 and $1000 for 2006 thereafter.
Annual Contribution Limits for IRAs per Individual
Tax years 2006 - 2007, $4000 for those under 50 and $5000 for those 50 and over
Tax year 2008, $5000 for those under 50 and $6000 for those 50 and over
Married couples can each contribute to an IRA even if only one have a job and for the year if the working spouse earns enough to cover the IRA contributions for both.
You can have other retirement plans also.
You can set up an IRA at a bank or other financial institution or with a mutual fund or life insurance company. You can also set up an IRA through your stockbroker. Any IRA must meet Internal Revenue Code requirements. The requirements for the various arrangements are discussed below.
Kinds of traditional IRAs. Your traditional IRA can be an individual retirement account or annuity. It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account
There are two common types of IRAs, the traditional IRA and the Roth IRA. All accumulated interest, dividends, and capital gains on a traditional IRA are tax-deferred until the money is withdrawn.
Money invested and earned in a traditional IRA are subject to income taxes at time of withdrawal. Withdrawals can be made without penalty once you reach the age of 59 1/2 years of age and you must begin withdrawing from your account when you reach the age of 70 1/2.
