WHAT IS A TRADITIONAL IRA?

A traditional IRA is any IRA that is not a Roth, SEP, SIMPLE, or Coverdell Educational Savings Account.

A traditional IRA may be opened by any individual who has earned income, and wishes to defer or eliminate the payment of taxes on income or funds set aside for retirement.  Contributions to traditional IRAs may not be made if you are 70½ years of age, or over.

Distributions may be taken after attaining age 59½ without penalty.  Distributions may also be penalty free before age 59½ if made on account of death, disability, certain higher education expenses, first time home purchases, and other exceptions, including substantially equal periodic payments per IRS Regulation 72t.
The distributions are taxed as ordinary income.

  Contribution Stipulations

If you are eligible to contribute to your IRA, the amount of the contribution for which you may take a tax deduction will depend upon whether you (or, in some cases, your spouse) are an active participant in an employer-maintained retirement plan.
 
  •If you (and your spouse) are not an active participant, your entire IRA contribution will be deductible.
 
  •If you are an active participant (or are married to an active participant), the deductibility of your contribution will depend on
your modified adjusted gross income (MAGI) and your tax filing status for the tax year for which the contribution was made.

~MAGI is determined on your income tax return using your adjusted gross income but disregarding any deductible IRA contribution.
(See your Tax Advisor for assistance in determining the deductibility of your IRA contributions)

 
Generally, you will be an active participant if you are covered by one or more of the following employer-maintained retirement plans:

  A Qualified Pension, Profit Sharing, 401(k), or Stock Bonus Plan
  A Qualified Annuity Plan of an Employer
  A Simplified Employee Pension (SEP) Plan
  A Retirement Plan Established by the Federal Government, a State, or a Political Subdivision
  (except certain unfunded deferred compensation plans under Code Section 457)
  A Tax-Sheltered Annuity for Employees of Certain Tax-Exempt Organizations or Public Schools
  A Plan Meeting the Requirements of Code Section 501(c)(18)
  A Qualified Plan for Self-Employed Individuals (H.R. 10 or Keogh Plan)
  A Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA Plan or a SIMPLE 401(k) Plan

If you do not know whether your employer maintains one of these plans, or whether you are an active participant in it, check with your employer or your tax advisor.
 
Also, the IRA Form W-2, Wage and Tax Statement you receive at the end of the year from your employer will indicate whether you are an active participant.