 How
much may I contribute to my Traditional IRA?
With the new, higher contribution limits having been made permanent under
the Pension Protection Act of 2006, your Traditional IRA contributions can
steadily increase over the years. Individuals age 50 and older will benefit
from even higher limits, allowing those closest to retirement age to save
even more.
The following chart shows the new higher Traditional IRA contribution limits:
|
Year |
IRA Owner Under Age 50 |
IRA Owner Age 50 or Older |
|
2006
2007
2008
2009
|
$4,000
$4,000
$5,000
$5,000*
|
$5,000
$5,000
$6,000
$6,000* |
*Subject to cost-of-living adjustments (COLAs) in $500 increments
(Note: If you contribute to both a Traditional and a Roth IRA, your total
combined contributions may not exceed the limits shown above. For example,
for 2006, if you are age 50 or older, you may contribute $5,000 to a Traditional
IRA or a Roth IRA, but if you contribute to both, the total contribution
to both is limited to $5,000.)
Your Traditional IRA contributions are limited to 100% of your compensation.
To make a regular contribution of $5,000 for 2008, you must earn at least
$5,000 in 2008.
What
if I don't earn very much money?
If you are under age 70½, married, and file a joint federal income
tax return with your spouse, you may be eligible to make a spousal contribution
to your Traditional IRA based on the combined income of you and your spouse.
For example, for 2008, if you are both age 53, you have earned $1,000,
and your spouse earns over $9,000, your may contribute up to $5,000 to
your Traditional IRA, even though your compensation for 2008 is less than
that, by basing your IRA contribution on your spouse's earnings in addition
to your own.
When
may I make contributions?
Contributions for a tax year may be made in the tax year, or up to the
tax-filing deadline for that tax year (not including extensions).
Good news for Traditional IRA owners! Starting in 2007, you can have
your federal income tax refund deposited directly to your Traditional
IRA!
Am
I eligible for any tax credits?
You may be eligible for a tax credit for Traditional IRA contributions
ranging from 10% to 50% of the amount you contribute (up to $2,000) for
a maximum tax credit of $1,000.
Are
contributions to my Traditional IRA deductible?
Your contribution is fully deductible if you (you and your spouse, if
married) do not actively participate in a workplace retirement plan (WRP).
If you or your spouse is an active participant in a WRP, the following
chart shows whether you are entitled to a full deduction, partial deduction,
or no deduction at all, based on your tax-filling status, your WRP participation
status, and your modified adjusted gross income (MAGI).
|
Tax filing Status |
Year |
Full Deduction if MAGI is at or below: |
Partial Deduction if MAGI is more than
/ but less than: |
No Deduction if MAGI is at or above: |
|
|
2006 |
$50,000 |
$50,000 / $60,000 |
$60,000 |
|
Single, Active Participant |
2007 |
$52,000 |
$52,000 / $62,000 |
$62,000 |
|
|
2008 |
$53,000 |
$53,000 / $63,000 |
$63,000 |
|
|
2006 |
$75,000 |
$75,000 / $85,000 |
$85,000 |
|
Married Filing Jointly, Active Participant |
2007 |
$83,000 |
$83,000 / $103,000 |
$103,000 |
|
|
2008 |
$85,000 |
$85,000 / $ 105,000 |
$105,000 |
|
|
2006 |
$150,000 |
$150,000 / $160,000 |
$160,000 |
|
Married Filing Jointly, Not Active Participant
but Spouse Is |
2007 |
$156,000 |
$156,000 / $166,000 |
$166,000 |
|
|
And later* |
|
|
|
|
|
2006 |
$0 |
$0 / $10,000 |
$10,000 |
|
Married, Filing Separately, You or Spouse
Active Participant |
2007 |
$0 |
$0 / $10,000 |
$10,000 |
|
|
And later* |
|
|
|
|
*COLA will be made in $1,000 increments.
How
do I withdraw money from my Traditional IRA?
You may withdraw money from your Traditional IRA at any time, and the
taxable portion of that withdrawal will be taxed as ordinary income. Distributions
you receive before you reach age 59½ may be subject to an IRS penalty.
However, this penalty does not apply to distributions that are:
 Paid while you are disabled,
Paid in substantially
equal periodic payments,
Paid to your beneficiary
after your death,
Paid for certain deductible
medical expenses,
Used for a qualifying
first-home purchase ($10,000 lifetime maximum),
Used for qualifying higher
education expenses,
Paid to certain military
reservists,
Converted to a Roth IRA,
or
Levied by the IRS
(Note: Many of these exceptions to the IRS 10% penalty contain certain
limitations. It is important that you check to see if you are eligible
for any of these exceptions before you withdraw money from your Traditional
IRA prior to age 59½.)
Once you turn age 59½ and withdraw money, the taxable portion
of any distribution you take is taxed as ordinary income; however, it
is not subject to the IRS 10% early withdraw penalty.
Important! The tax rules are often
complicated. This brochure is meant solely as an overview. Before making
any investments, you should confer with a qualified tax advisor.
Security Federal Savings Bank is a mutually owned Communtiy Bank serving Cass, Howard and the immediate surrounding counties in North Central Indiana.
Locations
| Downtown Logansport |
East End Logansport |
Kokomo |
| 314 Fourth Street |
300 Mall Road |
519 Markland Ave. |
| (574) 722-6261 |
(574) 722-3826 |
(765) 457-1161 |
|
