A traditional IRA (Individual Retirement Arrangement)
is a way to save for retirement by making contributions to the plan that may be tax-deductible. For example, if you earn $90,000 a year and make a contribution to an IRA for $5,000, your income for tax purposes is reported as $85,000.
- Contributions you make to a traditional IRA may be deductible, depending on your income level, and whether or not you participate in a company retirement plan.
- Generally, amounts in your traditional IRA (including earnings and gains) are not taxed until distributed.
Traditional IRA Rules for Contributions
To make a traditional IRA contribution, you must:
1). Have some form of taxable compensation to contribute in the form of wages, tips, salary, commissions, self-employment income, or other taxable income.
2). Have taxable compensation that does not exceed the IRA income limits as outlined below.
IRA Contribution Limits 2011
If you are under 50 years of age before the end of 2011: Your IRA contributions are limited to $5,000 for 2011. If you choose to contribute to both a traditional IRA and a Roth IRA, this limit can be split between a traditional IRA and a Roth IRA, but the combined limit is still $5,000.
Your IRA contribution is also limited to the smaller of $5,000 or the total amount of your taxable compensation for 2011.
If you are 50 years of age or older before the end of 2011: Your IRA contribution is limited to the $6,000 for 2011. This limit can be split between a traditional IRA and a Roth IRA but the combined limit is still $6,000.
Your IRA contribution is also limited to the smaller of $6,000 or the total amount of your taxable compensation for 2011.
| Year | Under age 50 | Age 50+ |
| 2011 | $5,000 | $6,000 |
Traditional IRA Rules Summary
| You can open and make contributions to a traditional IRA if: |
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| You tax deductible contributions are limited based on: |
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| You must begin taking withdrawls when you reach age 70 1/2. |
The maximum deductible contribution to a traditional IRA may be reduced depending on your modified adjusted gross income below.
2011 IRA Income Limits if you are NOT Covered at a Retirement Plan at Work
| If You Have Taxable Compensation and Your Filing Status Is… | And Your Modified AGI Is… | Then you can take … |
| single, head of household, or qualifying widow(er) | any amount | a full deduction. |
| married filing jointly or separately with a spouse who is not covered by a plan at work | any amount | a full deduction. |
| married filing jointly with a spouse who is covered by a plan at work. | $169,000 or less | a full deduction. |
| more than $169,000 but less than $179,000 | a partial deduction. | |
| $179,000 or more | no deduction. | |
| married filing separately with a spouse who is covered by a plan at work. | less than $10,000 | a partial deduction. |
| $10,000 ore more | no deduction. |
2011 IRA Income Limits if you ARE Covered at a Retirement Plan at Work
For 2011, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is:
| If your filing status is … | And Your Modified AGI Is… | Then you can take … |
| single or head of household | $56,000 or less | a full deduction. |
| more than $56,000 but less than $66,000 | a partial deduction. | |
| $66,000 or more | no deduction. | |
| married filing jointly or qualifying widow(er) | $90,000 or less | a full deduction. |
| more than $90,000 but less than $110,000 | a partial deduction. | |
| $110,000 or more | no deduction. | |
| married filing separately | less than $10,000 | a partial deduction. |
| $10,000 ore more | no deduction. |
If you contribute to an IRA and you earnings are above the IRA income limits above, then you may have a non-deductible IRA. See the non-deductible IRA section for instructions on how to convert a non-deductible IRA into a Roth IRA.
From Traditional IRA Rules to Roth IRA Rules
IRA vs Roth IRA
Non-Deductible IRA
Roth IRA Contribution
Roth IRA Conversion
Roth IRA Recharacterization
Roth 401k
Back to the Roth IRA Home Page
