Cypress West Federal Credit Union

The Traditional IRA provides certain tax advantages when you set aside a portion of your earnings to build your retirement income. IRAs are individually owned contracts that are available to all working and self-employed people and do not require employer sponsorship. If you satisfy certain income requirements, your contributions to a Traditional IRA are tax deductible. If you are not entitled to a tax deduction, you may make nondeductible contributions. If your spouse is not working and is under age 70 1/2, you may be able to establish a spousal IRA and contribute to it on your spouse's behalf.

Who's eligible?

If you are under age 70 1/2 with earned income and employed, you may currently contribute up to $5,000 (but not more than 100% of your compensation) to a Mutual of America Traditional IRA.
If your spouse is not working and is under age 70 1/2, you may also be able to establish a spousal IRA and contribute up to an additional $5,000 per year.
Your income and whether or not you or your spouse are active participants in certain tax-qualified retirement plans will determine if you can deduct any, all or part of your IRA contributions from your federal taxes. Learn about tax advantages.

What are the contribution limits?

Currently, the annual dollar limit for contributions and deductions to a Traditional IRA is limited to $5,000 or 100% of compensation, if less. Rules limiting or eliminating deductions for active participants in employer retirement plans based on federal adjusted gross income (AGI) levels apply to these limits.

The annual dollar limitations will increase as follows:

For years 2002 through 2004 - $3,000
For years 2005 through 2007 - $4,000
For year 2008 - $5,000
For year 2009 and subsequent year - $5,000 indexed for inflation in $500 increments

REMINDER: Indexing does not automatically increase the limit each year; increases only apply when the inflation-adjusted limit equals or exceeds the next incremental amount.

Learn more about Traditinal IRA Contributions & Withdrawals.

Age 50 catch-up contributions

The dollar limits are further increased by an additional amount for individuals who are age 50 or older at any time during the year (i.e., attain age 50 by December 31). The additional limit for 50-year-olds, or so-called "catch-up contribution" limit, is:

For years 2002 through 2005 - $500
For year 2006 and subsequent years - $1,000

The age 50 catch-up is not indexed for inflation.

Thus, for example the new IRA contribution limit for 2009 will be:

$5,000 for individuals under age 50
$6,000 for individuals age 50 or older

NOTE: Although the additional limit increase for 50-year-olds is referred to as a "catch-up contribution" limit, it does not require that the individual has contributed less than the maximum limit in prior years as other, traditional catch-up contribution rules do. The full additional age 50 contribution can be made even if maximum contributions have always been made in all prior years, subject to phase-out rules based on AGI.