Traditional IRA: A Traditional IRA is any IRA that is not a Roth, SIMPLE, or Coverdell Education Savings Account. A Traditional IRA can be opened by any person who has earned income, and wishes to defer or eliminate the payment on taxes on income on funds set aside for retirement. Once you are 70 1/2 or over, you may not make contributions to Traditional IRAs. If you are eligible to contribute to a Traditional IRA, the amount of contribution that you can make a tax deduction on will depend if you are an active participant in a retirement plan maintained by your employer. If you are not an active participant, your entire IRA contribution will be deductible. If you are an active participant, the amount you can deduct from your contribution will depend on your Modified Adjusted Gross Income (MAGI) and your tax filing status for the year in which the contribution was made.
(MAGI is determined on your income tax return using your adjusted gross income and disregarding any deductible IRA contribution. ) To be considered an active participant, you must be covered by one or more of the following employer maintained retirement plans: 1. ) a qualified pension, profit sharing, 401 (k), or stock bonus plan; 2. ) a qualified annuity plan of an employer; 3. ) a simplified employee pension plan; 4. ) a retirement plan established by the federal government, a state, or a political subdivision; 5.
) a tax-sheltered annuity for employees of certain tax-exempt organizations or public schools; 6. ) a plan meeting the requirements of Code section 501 (c) (18); 7. ) a qualified plan for self-employed individuals; 8. ) a savings incentive match plan for employees of small employers (SIMPLE) IRA plan or a SIMPLE 401 (k) plan. Details: Traditional IRA Minimum to open: $2, 000 Tax Advantages Contribution: Tax-deductible Earnings: Tax-deferred (taxed when you begin withdrawing) Withdrawals: Taxable (except withdrawals of non-deductible contributions) Who's Eligible: Anyone with earned income may contribute up to age 70 1/2..