The Traditional IRA

BOSTON (CBS) - IRAs have been around for 40 years! According to the Investment Company Institute, (ICI) 40% of all households have at least one IRA and there is over $6.5 trillion invested in IRAs.

IRAs are a very useful tool for retirement planning but not enough folks are contributing to them that are eligible to use them. A primer on IRAs is needed.

If your employer does not sponsor a retirement plan at work such as a 401(k) you can start your own retirement plan using an IRA. The IRS and Congress does have some rules:

• You must have earned income to contribute. Alimony does qualify.
• Contributions are limited to $5,500. There is a $1,000 catch-up provision if you over age 50.
• You may be eligible for a deduction for the amount you contribute - If your spouse is eligible for a retirement plan then you are limited by your joint income
  -          Deduction phased out between $181,000 to $191,000
• Money in the IRA grows tax-deferred
• Withdrawals from your IRA will be taxed as ordinary income
• Withdrawals must begin once you reach age 70½, the IRS is strict about this.
• Withdrawals before age 59½ usually result in a 10% penalty, but there are some exceptions:
  -          Death
  -          Disability
  -          Medical expenses in excess of 10% of AGI
  -          Health insurance premiums if unemployed for 12 consecutive weeks
  -          Qualifying higher education expenses for family members
  -          Qualifying first time home purchase ($10,000 lifetime limit)
  -          Substantially equal payments made over life expectancy (IRS rule 72t)

If you have a retirement plan at work, fund that first. If your employer does not offer a retirement plan, use an IRA for your retirement savings. For more help check out the IRS's website, and download publication 590.

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On Saturday May 17^th Dee will be the keynote speaker at The Money Conference which is a FREE one-day event presented by The Office of Massachusetts State Treasury and the Massachusetts Financial Literacy Trust Fund, in conjunction with local cities and community partners to help households build their financial knowledge and improve their financial behavior through quality financial education.

The Money Conference: Financial Empowerment for Individuals & Families

Saturday May 17, 2014
8:30 am - 3:00 pm

Everett High School
100 Elm Street
Everett, MA 02149

Questions? Contact Sheila O'Loughlin at (617) 367-6900.

Do you feel your need for financial education and empowerment is urgent? You are not alone! Americans are saving less, spending more and carrying credit card debt over from month-to-month, suggesting that the painful financial lessons of the recent past may quickly be forgotten.

In:
• Anthony Silva