The federal government allows wage earners younger than 701&Mac218;2 years old to deposit $2,000 in a special account known as an IRA. IRA's can be invested in instruments such as stocks, CDs, mutual funds, bonds, or government securities. These monies may be eligible (there are restrictions based on wage and marital status) for deduction from gross income for income tax purposes. The primary advantage of IRA's is that contributions, interest, dividends, and capital gains are tax-deferred until money is withdrawn on retirement. The recently introduced Roth IRA is not tax deferred, however, withdrawals are considered non-taxable income.
A self-directed, tax-deferred retirement plan, in which gainfully employed persons may contribute annually up to $2,000 for an individual or $2,250 for an individual and non-working spouse.
A tax-deferred product offered by banks, mutual funds and other companies. Under current law, a married couple can put $4,000 ($2,000 each) into their own IRA each year in a wide range of savings accounts and investments. Earnings are tax-deferred until you begin withdrawing the money (which you can start doing without penalty after age 59 ?). Under current tax law, some people (depending on their income, marital status or other factors) can deduct all or part of their IRA contributions, which reduces their taxes.
Anyone under the age of 70-1/2 who has earned income may open an IRA. Contributions grow tax-free until they are withdrawn. Maximum annual contribution allowed by IRS is $3000 (2001-2004), $4000 (2005-2007). Distributions must start by age 70-1/2 or incur a 50% excise tax. Premature distributions before age 59-1/2 will incur a 10% penalty tax. (See Rollover)
Merchants and Farmers Bank offers two types to choose from for eligible individuals, the Traditional IRA and the Roth IRA.
Individual Retirement Accounts are tax-deferred retirement savings vehicles available to all persons regardless of age who receive taxable compensation (i.e., wages from a job) during the year. Contributions may or may not be tax deductible.
Three types to choose from for eligible individuals: the Traditional IRA, Roth IRA, and the Coverdale Education Savings Account (CESA). DESIGN NOTE: (Above are links to respective parts of the site)
Many investors hold interests in limited partnerships in their Individual Retirement Accounts, or IRAs. The fair market value of limited partnerships and other non-marketable assets must be reported to the IRS by IRA custodians on Form 5498 each year.
These personal saving and investment accounts allow workers and their spouses to accumulate retirement savings on a tax-deferred basis.