Key Characteristics of Traditional IRAs
By Kumar B Trivedi Published: 12/27/2008
What are the tax benefits?
The tax benefits for traditional IRAs are that the contributions are tax deductible; however, there are a few exceptions. If you are eligible to enroll in an employer sponsored retirement plan and your income exceeds $50,000-60,000 these contributions are not tax deductible.
What are the eligibility requirements?
To set up an IRA you need to have earned income and must be able to meet the contribution limits.
What about vesting?
All contributions vest instantaneously.
What are the enrolment deadlines?
An IRA must be set up by April 15 of the next year.
What are the contribution limits?
The contribution limits go up to $5,000 a year. If you are 50 or older the contribution limits may reach up to $6,000 a year.
What are the contribution sources?
Contribution sources include salary, commissions, and/or alimony.
Are there any withdrawal penalties?
With the exception of disability, education expenses, and the purchase of a first home, a 10% will be incurred to individuals under the age of 59 ½.
What about transfers?
Almost all of the funds in an existing IRA can be transferred to another traditional IRA or retirement plan.
What about borrowing?
Loans are not permitted with IRA accounts.
What about beneficiaries?
Primary and contingent beneficiaries can be designated.
What are Required Minimum Distributions?
You are required to begin making withdrawals after the age of 70 ½.
Are there any fees and minimums?
There may be annual fees that range from $0-50 along with some minimums that range from $0-25, all depending on the provider of the plan.