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The IRA was created to encourage retirement
savings for working individuals.
Eligibility
• All individuals under age 70 1/2
with earned income may contribute to an IRA. A nonworking spouse is
eligible to contribute to an IRA as long as the couple’s contributions
do not exceed their combined earned income.
Contributions
• The lesser of 100% of earned income
or $5,500 in 2013.
• A nonworking spouse is eligible to
contribute $5,500 to an IRA as long as the couple’s contributions do
not exceed their combined earned income.
• Catch-up contribution for
individuals age 50 and over is $1,000.
• Contribution deadline is
individual’s tax return due date (excluding extensions).
Deductibility
•
IRA contributions are fully deductible unless the individual is a
participant in an employer-sponsored retirement plan. If covered by an
employer-sponsored plan, the deductibility of an IRA contribution will
depend on the adjusted gross income (AGI) of the IRA owner and, in the
case of married couples, their spouse.
Active participants in an employer-sponsored plan
can make a deductible IRA contribution if their income is below the
following levels for 2013:
| Joint Returns (AGI) |
Individual Returns (AGI) |
| $95,000
–
$115,000 |
$59,000
–
$69,000 |
• Active participant status is
considered independent of a spouse. If one spouse is an active
participant in an employer-sponsored retirement plan, the spouse who
is not may make a fully deductible IRA contribution if the couple’s
modified AGI is less than $178,000.
Distributions
•Distributions are taken at the
owner’s discretion.
• All non-taxed dollars will be taxed
as ordinary income when withdrawn from an IRA.
• Distributions taken before age 59
1/2 have a 10% penalty except in the event of death, disability,
return of non-deductible contributions, substantially equal periodic
payments, medical expenses (certain conditions prevail), first time
home buyers, and qualified educational expenses.
• At age 70 1/2, distributions become
mandatory and must be taken over the life expectancy of the owner.
• Eligible rollover distributions
from IRAs may be rolled into other IRAs, Qualified Plans, 403(b)s, and
457 Plans. "After-tax" distributions from IRAs are not eligible to
roll to Qualified Plans, 403(b)s, or 457 plans.
Before making
decisions about Individual Retirement Accounts, investors should
consult their tax advisor. Stifel Nicolaus does not offer tax advice.
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