Important Traditional & Roth IRA Rules

Many of us now make contributions to an Individual Retirement Account to safeguard our financial future and save for retirement. It is important to understand the specific IRA rules so that we can take full benefit of the savings plan. Any form of taxable income can be used in IRA contributions; this can include wages, fees, salaries, maintenance payments, bonuses, and commissions. The rules regarding IRA plans stipulate the exact amount that is allowed to be contributed as well as the conditions, circumstances, and timings, in which withdrawals can be made. There is a maximum deductible contribution limit that is set by the IRS. The annual amount, as of 2009, was $5,000 for those people under fifty years old. If you are over fifty then the amount is $6,000 dollars. These apply for both the Roth IRA and traditional IRA. You are allowed to pay more money than this into your IRA but it would not have any related tax deductions. There are certain Roth IRA rules that make the Roth different than its tradition IRA counterpart. These Roth IRA rules require that you meet certain income limits in order to participate. If you make less than $105,000 you can make a full contribution to the Roth IRA. And income between $105,000 and $120,000 qualifies for a partial contribution. Anything above 120,000 does not meet the Roth IRA rules. Married couples see a joint income threshold of $166,000, with partial contributions up to $176,000. Anything above that number does not qualify for participation in the Roth account. After you pass the age of 59 years and six months you can withdraw money from your Individual Retirement Account without being hit with a penalty, but a consideration is that you will stay be subjected to income tax. Usually any withdrawals before this age will be penalized apart from in specific situations. These may involve releasing the funds as you have become disabled, or if you want to pay for higher education fees. Upon reaching 70 years and 6 months you are required to withdraw what is called the RMD - required minimum distribution. The actual amount varies with age and the amount of funds held in the IRA. Whether you are eligible for deductions in relation to an IRA depends upon your current financial status. Those people that file their taxes as the head of household and earn a gross income of no more than $55,000 are allowed the maximum deductions. If your gross income is between $55,000 and $65,000 you can receive partial deductions, but those people that earn more than $65,000 are not eligible for IRA tax based deductions.