Lets Talk Money Online - Discover the many benefits of an IRA

If you have a workplace retirement plan, consider yourself fortunate. Not everyone does. According to one study, 75% of workers say they or their spouses have saved for retirement.* This means one out of every four people has not.

If you don't have a workplace retirement plan, consider contributing to either a traditional IRA or a Roth IRA to meet this important financial challenge. And even if you have a workplace retirement plan, an IRA can still supplement your retirement income nicely.

There are two types of IRAs -- a traditional IRA and a Roth IRA. Both IRAs share the same contribution allowances and are indexed to inflation. For 2010, put up to $5,000 into either type of IRA. You also can contribute an extra $1,000 per year if you're at least age 50. You may invest in both at the same time, but your combined IRA contributions can't exceed these annual limits. You can generally make contributions to either IRA for a tax year up until April 15 of the following year.

You can open and contribute to a traditional IRA if your contributions don't exceed your earned income and you are under age 70½. How much income you make won't restrict your eligibility to contribute, only your tax deductions. In 2010, if you're single, you get a full federal income tax deduction if you:

Don't have access to a workplace retirement plan, such as a 401(k) or cash balance retirement plan, regardless of income.
Have a workplace retirement plan but the modified adjusted gross income on your tax return is less than $56,000.

If you file a joint return, you can make a fully tax-deductible traditional IRA contribution if:

Neither you nor your spouse is covered by a retirement plan at work.
You aren't covered at work, but your spouse is and your combined modified adjusted gross income is less than $167,000.
Both spouses are covered at work but have a modified adjusted gross income of less than $89,000.

When taking distributions, you'll pay income taxes on any growth from your traditional IRA. The same holds true with tax-deductible contributions. Distributions taken from either IRA before age 59½ are subject to an additional 10% federal income tax penalty with limited exceptions. You also must generally take minimum distributions by age 70½ from a traditional IRA but not from a Roth IRA.

A Roth IRA has other differences. You won't get a tax deduction on a Roth IRA contribution. But withdrawals are income tax free after you reach age 59½ and meet a five-tax-year qualification period. Your first tax year begins January 1 of the year you make your first contribution.

Not everyone can contribute to a Roth IRA. Currently, you can open and contribute the full amount to a Roth IRA if:

you're single with a modified adjusted gross income of less than $105,000; or
you file taxes jointly and have a modified adjusted gross income of less than $167,000.

This is an advertisement prepared by LTM Publishing, Inc. for the use of the sender. The advertisement provided is not intended as legal or tax advice and may not be relied on for purposes of avoiding federal tax penalties. All individuals, including those involved in the estate planning process, are advised to meet with their tax and legal professionals. The individual sponsoring this newsletter will work with your tax and legal advisors to help select appropriate product solutions. We do not endorse or guarantee the content or services of any website mentioned in this newsletter. We encourage you to review the privacy policy of each website you visit. Limitations, restrictions and other rules and regulations apply to many of the financial and insurance products and concepts presented in this newsletter, and they may differ according to individual situations. The publisher does not assume liability for financial decisions based on the newsletter's contents. Great care has been taken to ensure the accuracy of the newsletter copy at press time; however, markets and tax information can change suddenly. Whole or partial reproduction of Let's Talk Money® without the written permission of the publisher is forbidden. ©LTM Publishing, Inc., 2009.

We Value Your Input... Your feedback is very important to us. If you have any questions about any of the subjects covered here, or suggestions for future issues, please don't hesitate to call. You'll find our number on the front of this newsletter. It's always a pleasure to hear from you.