Your future financial security may be one of your biggest concerns, but careful planning and preparation can assure you of a sound retirement. With a Traditional IRA at First State Bank & Trust Co., you can make tax deductible contributions that will allow you to build a solid financial future.
Who is eligible to contribute to a Traditional IRA?
Individuals must have earned income are eligible to contribute to a Traditional IRA.
How much can I contribute each year?
In 2001, Congress passed the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) which increased the amounts of contribution. In addition, IRA owners who will turn 50 or older this year can make additional contributions called "catch-up" amounts to make up for their lost savings.
Qualified participates are permitted to contribute the following maximum amounts each year, or 100% of your income, whichever is less.
Maximum Contribution Limits
- 2023: Under Age 50 - $6,500
- 2023: Over Age 50 - $7,500
- 2024: Under Age 50 - $7,000
- 2024: Over Age 50 - $8,000
Are my contributions tax deductible?
You are eligible for a full deduction on your contributions if neither you nor your spouse is an active participant in an employer sponsored retirement plan. If you are an active participant, your deductible amount depends on your income and tax-filing status. Consult your tax professional to determine whether your contribution is tax deductible.
Required Minimum Distribution
Your required minimum distribution is the minimum amount you must withdraw from your account each year. You generally have to start taking withdrawals from your IRA, SEP IRA, SIMPLE IRA, or retirement plan account when you reach age 72 (70 ½ if you reach 70 ½ before January 1, 2020) or age 73 beginning January 1, 2024.
- You can withdraw more than the minimum required amount.
- Your withdrawals will be included in your taxable income except for any part that was taxed before (your basis) or that can be received tax-free (such as qualified distributions from designated Roth accounts).
Are my funds taxed at distribution?
All distributions attributable to deductible contributions are taxable. If you make withdrawals prior to age 59½, you may be subject to an additional 10% early withdrawal penalty tax. Your withdrawals may be exempt from this penalty tax if your distribution meets one of the following criteria:
- it is made due to death or disability,
- it is made in equal periodic payments,
- it is used to pay medical expenses in excess of 7.5% of your adjusted gross income,
- it is used to purchase health insurance for unemployed individuals,
- it is used to pay qualified higher education expenses,
- it is used for a first-time home purchase.
For additional information on Traditional or Roth IRAs, come by First State Bank & Trust Co. today and speak to an IRA representative.