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 and Roth IRA contribution limits:

 
2008
2009*
2010*
2011*
2012*
Under Age 50
$5,000
$5,000
$5,000
$5,000
$5,000
Traditional
IRA Age 50-70 1/2
$6,000
$6,000
$6,000
$6,000
$6,000
Roth
IRA Age 50 or Older
$6,000
$6,000
$6,000
$6,000
$6,000

*Beginning in 2009, cost of living adjustments (COLA) made in $500 increments apply to the $5,000 contribution limit, but only if the inflation adjustments results in at least a $500 increase. The extra $1,000 contribution limit available to individuals age 50+ is not adjusted for inflation.

(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 2009, if you are age 50 or older, you may contribute $6,000 to a Traditional IRA or a Roth IRA, but if you contribute to both, the total contribution to both is limited to $6,000.)

Your Traditional IRA contributions are limited to 100% of your compensation. To make a regular contribution of $5,000 for 2010, you must earn at least $5,000 in 2010.

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 2010, if you are both age 53, you have earned $1,000, and your spouse earns over $9,000, your may contribute up to $6,000 to your Traditional IRA, even though your compensation for 2010 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:
2008
$53,000
$53,000 / $63,000
$63,000
Single, Active Participant
2009
$55,000
$55,000 / $65,000
$65,000
2010
$56,000
$56,000 / $66,000
$66,000
2008
$85,000
$85,000 / $ 105,000
$105,000
Married Filing Jointly, Active Participant
2009
$89,000
$89,000 / $109,000
$109,000
2010
$89,000
$89,000 / $109,000
$109,000
2008
$0
$0 / $10,000
$10,000
Married, Filing Separately, You or Spouse Active Participant
2009
$0
$0 / $10,000
$10,000
2010
$0
$0 / $10,000
$10,000

*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 Community Bank serving Cass, Howard, Carroll, Tippecanoe and the immediate surrounding counties in North Central Indiana.

Locations

Downtown Logansport East End Logansport Kokomo Delphi Lafayette
314 Fourth Street 300 Mall Road 519 Markland Ave. 1230 S Washington

635 S Earl Ave,
Suite C

(574) 722-6261 (574) 722-3826 (765) 457-1161 (765) 564-3000 (765) 250-3916

 
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