Traditional IRA RulesSince Individual Retirement Accounts (IRAs) were introduced to the public in the early 1980’s they have had quite an impact on how people approach their financial futures and the way they plan ahead. Traditional IRAs are a very powerful tool that can be used in order to better plan for retirement. They come with more benefits (and more restrictions!) than savings accounts and they can even be assisted in part by your employer if they are part of the plan you are in. What does a traditional IRA do? A traditional IRA is one of the more popular forms of IRA accounts (there are several flexible plans available). Traditional IRAs are set apart because they can aid in retirement income. Social Security is set up as a government issued retirement fund but personal savings typically has to supplement Social Security to meet all of your needs. Also, by opening a traditional IRA account you can lower your income taxes right now and you can defer taxes on your income for years to come. Of course, opening an account with this many benefits comes with a few restrictions but as long as you follow all the rules you should not have a problem. The biggest restriction dealing with traditional IRAs is the withdrawal restriction. Typically you cannot withdraw funds from your IRA until you have reached the age of 59 1/2. The reason for this is the IRS does not want you sticking your fingers in your own retirement fund, soaking up the tax free benefits, without actually using the funds for retirement. The restriction is actually more of a protection for you than it is an unnecessary barrier. However, there are several exceptions to this withdrawal restriction, such as needing the money to pay medical bills. If you try to withdraw funds from your traditional IRA account before age 59 1/2 you will usually have to pay a 10% fee. Who can open up a traditional IRA account? Just about anyone can as long as they are less then 70 1/2 years of age, can open an account. The only real qualification you need is that you need to receive taxable compensation each year. In other words, you have to have a job. After you have opened an account, you can benefit tax- wise in these two ways:
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