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And
which one is right for you?
An IRA or Individual
Retirement Account is a plan that allows you to contribute up to $3000
per year. If you are 50 or older, you can contribute even more to your
IRA.
Anyone can
contribute to an IRA if they have earned income for the year at least
equal to the amount of the contribution. The maximum contribution for
2004 is $3000 and will rise to $5000 by 2008. Those who reached 50 years
of age by the end of 2002 can make additional "catch up" contributions
of $500 through 2005 and $1000 for 2006 thereafter.
Annual Contribution
Limits for IRAs per Individual
·
Tax
year 2005, $4000 for those under 50 and $4500 for those 50 and over
·
Tax
years 2006 - 2007, $4000 for those under 50 and $5000 for those 50 and
over
·
Tax
year 2008, $5000 for those under 50 and $6000 for those 50 and over
Married couples can
each contribute to an IRA even if only one had one for the year if the
working spouse earns enough to cover the IRA contributions for both.
There are two
common types of IRAs, the traditional IRA
and the Roth IRA. All accumulated interest,
dividends, and capital gains on a traditional IRA are tax-deferred until
the money is withdrawn. All accumulated interest, dividends, and capital
gains on a Roth IRA are tax-free if you meet certain requirements.
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