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Traditional IRA: Save Now & Later
Filed under: Savings, Young Adults, Adults, Retirees
Saving for retirement is sometimes hard to fit into your budget. You know the earlier you start saving the longer your money has time to grow, but day to day expenses can get in the way of adding to or starting your retirement fund. Contributing to an Individual Retirement Account, IRA, may help you save money on your taxes now while you save for the future.
If you are a single person and you earn $63,000 or less in 2008 your contribution to a Traditional IRA can reduce your 2008 Federal tax bill. The same applies to a married couple, filing jointly, that will earn $105,000 or less in 2008. How does that save you money now? When you fill out your tax form you get to subtract all or part of the money you put into your Traditional IRA from your income. If your income is less, so is the amount of tax due.
The money you put into your Traditional IRA will earn dividends until you withdraw it in your retirement years. To help save you money later, the dividends you earn on your IRA do not have to be included as part your income each year. The IRA dividends aren't taxed until you withdraw the money after you've retired and your income has been reduced. There again, if your income is less, so is the amount of tax due.
If you earn more than the amounts stated above you may still be able to deduct all or part of your Traditional IRA contributions. Another factor that affects the amount of your deduction is whether or not you are covered by an employer's pension plan.
If you would like to find out more about IRAs you can stop in one of our offices and talk to a Senior Member Service Representative or pick up a brochure. Please call if you'd like us to mail you IRA information. Talk to your tax advisor to find out how much of your contributions to a Traditional IRA are deductible. If you think an IRA can help you on last year's tax return, the deadline for contributing to your 2008 IRA is April 15, 2009.
