IRAs are wonderful tools for both investing for retirement and for tax planning. There are traditional IRAs and Roth IRAs. Traditional IRA's offer tax deductions on before-tax contributions, tax deferred growth, and taxable distribution. Roth IRAs involve after-tax contributions with tax free growth and distribution. Your personal financial status will determine which type of IRA is best for you. Both types of IRAs do have contribution regulations in common.
The current contribution limit for both IRAs is $5500. If you are 50 or older during a given tax year your contribution limit rises to $6500. If you have more than one IRA account, the dollar amounts above represent the combined total allowed.
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Eligible compensation is required to make IRA contributions. Contributions can't be higher than your earned income for the year. You can contribute to a Roth IRA at any age while you can only contribute to a traditional IRA up to the age of 70 ½.
If you have an employer pension plan, traditional IRA contributions are not tax deductible. Contributions also aren't deductible if your income is above certain levels.
Contributions to IRA's can be made at any time through the year until April 15th of the following year. The sooner the contribution is made the more time you have for growth within the IRA. If you make your contribution between January and April 15th be sure to indicate the tax year you are making the contribution for. There are some extensions allowed for military personnel.
Annually review your named beneficiaries on file with your IRA. Life events may change who you want named. The most common reasons to change named beneficiaries are births, deaths, marriages, and divorces.
IRAs are valuable tools. Get the most out of them that you can. Check with your financial advisors and the IRS for guidelines and regulations that specifically apply to you.