| The Traditional IRA |
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What is a traditional IRA? It’s the original tax deferred savings plan that was set up back in 1974 to provide a means for employees that didn’t have a pension plan to have a tax deferred means of saving for their retirement. Since then employees with pension plans have been allowed to open IRAs. The big difference between the traditional IRA and the Roth IRA is any money withdrawn from the traditional account is subject to income tax at the time of the withdrawal. When money is withdrawn from the Roth (after 5 years of holding it,) absolutely no money is taxed. Restrictions: the traditional IRA has more restrictions and withdrawal requirements. It allows penalty free withdrawals only after the age of 59 ½ and requires mandatory withdrawals after the age of 70 1/2. However, there are exceptions to these restrictions, and early withdrawal can be made without penalty in the event of:
The amount of withdrawal is based on your life expectancy. And get this, under current law, if these withdrawal are not made a 50% penalty will be charged on the amount that should have been withdrawn. Wow! What a racket, and yes, they will do it. The good news: the good news is contributions into the traditional IRA are tax deductible with limits at $5000 Investment vehicles available for traditional IRAs Stocks, Mutual Funds, ETFs, Bonds, Annuities, REITs, CD’s, Gold, Silver, Real Estate, Currencies, Commodities, oil and gas. |
