A traditional IRA can play an important role in your overall retirement strategy. It offers the
flexibility of an ‘individual’ account and typically provides more flexibility than an employer’s
retirement plan by increasing your investment options, helping diversify your portfolio and tax
strategy, and consolidating your accounts.
Traditional IRAs offer another way to contribute to your retirement beyond an employer
sponsored retirement plan. Traditional IRA contributions may be tax-deductible (this differs
from Roth IRAs), so you may be able to deduct the yearly amount you contributed to your
Traditional IRA from your taxable income. Keep in mind the amount of deductible contribu-
tions allowed is subject to income limitations.
Another feature of a traditional IRA is that while your money is in the account it grows on a
tax deferred basis meaning you are not being taxed yearly on your earnings. If your IRA
consists of tax deductable contributions and earnings all withdrawals will be taxable. If your
IRA has after tax contributions and earnings, then the cost basis (after tax contributions) will
not be taxed but the earnings will be taxed upon withdrawal. Withdrawals can begin at age
59½ and minimum distributions are mandatory by age 70½. If you withdraw any funds prior
to age 59½ you could incur a 10% penalty charge on your withdrawals along with your
normal income tax.
Opening a traditional IRA can be done by either funding a new account or by performing a
roll over from an employer’s retirement plan (401(k), 403(b), 457(b), etc). There are no
income limitations on who can open a traditional IRA. However, once you reach age 70½
you are no longer eligible to make contributions. The contribution limit in 2009 for a tradi-
tional IRA is $5,000 per year ($6,000 if you are age 50+), which means no matter how many
IRAs you have (traditional or Roth), your combined contribution to them cannot exceed that
maximum.
SecurePathSM by Transamerica Advantage
If you are interested in learning more about traditional IRAs or have any questions about
rolling over your retirement plan from a previous employer, contact a SecurePathSM by
Transamerica financial advisor at 866-248-9421
for a complimentary consultation. An advisor can walk you through how rolling to an IRA may increase your
investment options, diversify your portfolio and consolidate your accounts.
Don’t Forget! Make sure to ask your advisor about the 2010 Roth conversion rules to see if
a conversion or partial conversion makes sense for you.
