A Traditional IRA offers two important advantages or incentives to encourage people to save for retirement. First, Traditional IRA contributions may be tax deductible on your tax return. Second, earnings on a Traditional IRA are not taxed until you or your beneficiary takes the assets out of the IRA.

Additional Tax Advantages Of A Traditional IRA
Contributions to your Traditional IRA may be deductible from your gross income. Eligibility to take a deduction for IRA contributions are based on whether you or your spouse are active participants in an employer-sponsored plan, your tax return filing status, and the amount of your modified adjusted gross income claimed on your federal income tax return for the year in which the contributions were made. Earnings from your Traditional IRA can grow on a tax-deferred basis.

Contribution Limits For A Traditional IRA
In 2006, annual contributions for a Traditional IRA are up to $4,000 or 100% of earned income. Married couples, can contribute a total of $8,000 to a Traditional IRA. Each IRA would be $4,000. This amount can be contributed to two Traditional IRAs provided that either party has earned income of at least $8,000. This amount would include Roth and Traditional IRA’s combined.

Catch Up Contributions For A Traditional IRA
Catch up contributions are allowed for accountholders who are age 50 or older. As an example, for tax years 2006-2007 up to $5,000 can be contributed toward a Traditional IRA. In 2008, contributions for a Traditional IRA will increase to 6,000.

Distributions Guidelines For A Traditional IRA
Distributions can be taken from a Traditional IRA at any time; however, distributions before age 59 1/2 may be subject to a 10% IRS penalty for early withdrawal. The only time this penalty would not be applied would be if the distribution qualifies under one of the listed exceptions, such as death, disability, attainment of age 59 1/2 , scheduled distributions pursuant to Internal Revenue Code section 72(t), etc. Distributions from a Traditional IRA are taxed at ordinary income rates. Distributions from a Traditional IRA are required after age 70 1/2.