Traditional IRA
Candlefocus EditorIndividuals can contribute up to $6,000 in 2022 and $6,500 in 2023 to their traditional IRA, and those aged 50 and over can contribute up to an additional $1,000 in both years. These limits are set by the Internal Revenue Service (IRS), and any contributions beyond the limit may be subject to penalties and additional taxes. Eligibility to contribute is based on age, earned income, and tax filing status.
When it comes to withdrawals, individuals must start taking required minimum distributions (RMDs) no later than age 72. Keep in mind that ordinary income taxes are due on all withdrawals prior to reaching age 59 ½. Early withdrawals may also be subject to a 10% penalty.
In addition, traditional IRA contributions can be deductible on an individual’s taxes, depending on their income level, marital status, and other factors. Specific tax regulations should be considered when deciding if traditional IRA contributions are right for a given individual.
Overall, a traditional IRA is a great option for individuals looking to save for retirement. The tax-deferred growth and the potential for deducting contributions from incomes taxes can make traditional IRA savings a valuable part of one’s financial plan. Individuals should research the specific rules and regulations for traditional IRAs and consult with a tax advisor or certified financial planner to ensure their contributions and withdrawals best align with their financial goals.