Individual Retirement Accounts

A Traditional IRA is the term for a regular IRA available to those under age 70 1/2 who have earned income (i.e., job compensation). Earnings within the traditional IRA grow tax-deferred until withdrawal. Withdrawals must begin, and will be taxed, when the owner reaches age 70 1/2. If required distributions are not taken at that age, a 50% penalty will be assessed on the amount not taken. When made, contributions may or may not be tax deductible. Individual filers, covered by a Retirement Plan at work, may make a fully deductible $3000 contribution if their Modified AGI is less than $33,000. The deduction decreases to zero at $43,000. There is no AGI limit for contributions if an individual is not covered by a retirement plan at work.