Do you need an IRA?
An IRA offers you a great way to save for retirement and receive income tax benefits.
The basic IRA contribution limit for 2011 is $5,000. If you turn age 50 or older during the tax year, you can make an additional $1,000 contribution.
Traditional IRA
A Traditional IRA provides tax-deferred growth until you make a withdrawal. Withdrawals are subject to ordinary income taxes. A 10 percent premature distribution penalty may apply if you take a withdrawal before age 59 1/2.
You can deduct contributions to a Traditional IRA from your income taxes if:
- You’re single and do not participate in an employer-sponsored retirement plan
- You’re married, and you and your spouse do not participate in an employer-sponsored retirement plan
Your ability to deduct a Traditional IRA contribution may be limited if you participate in any employer-sponsored retirement plan. Your modified adjusted gross income (AGI) levels must be:
- Married couples filing jointly – less than $110,000 in 2011 (combined AGI)
- Single – less than $66,000 in 2011
Roth IRA
Contributions are not tax-deductible. However, you can take income tax-free and penalty-free withdrawals of earnings after a Roth IRA has been established for five years and one of the following events has occurred to the holder of the IRA:
- Attained age 59 1/2
- Disability
- Death
- Qualified as a first-time home buyer
Unlike a Traditional IRA, you don’t have to begin taking distributions from a Roth IRA at age 70 1/2. You can even continue making contributions if you’re still working and have earned income after 70 1/2.
To make a contribution to a Roth IRA, your Adjusted Gross Income must be:
- Single – Less than $122,000 in 2011
- Married couple filing jointly – Less than $179,000 in 2011
Which IRA is best for you?
It depends on your personal situation. Contact me, and I’ll help you determine which Modern Woodmen of America IRA is best for you.
Gregory A. Boyce is a registered representative. Securities offered through MWA Financial Services Inc., a wholly owned subsidiary of Modern Woodmen of America, 1701 1st Avenue, Rock Island, IL 61201, 309-558-3100. Member: NASD, SIPC.