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Traditional IRA

An IRA is an Individual Retirement Account and is a form of a retirement plan. Opening an IRA may be the right choice for your future — it provides many benefits, such as tax advantages, depending on the type of IRA that you choose. BancorpSouth Wealth Management advisors can assist you in selecting the most appropriate type of IRA for you, based on your goals and financial situation.*

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Tax Advantages

Receive tax advantages that allow your money to work harder for you.

  • Choose from the available options to best suit your needs
  • Can be opened at any time
  • Receive tax advantages on contributions

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How It Works

How It Works

  • If you have earned income from working and have not reached age 70 1/2  this year, you may contribute to an IRA on or before the tax-return deadline, excluding extensions.
  • You may contribute up to $5,500 ($6,500 if you are 50 or older) annually, or 100% of your earned income from working, whichever is less.
  • All IRA earnings are tax-deferred. This means your IRA earnings are not taxed until you take withdrawals from your IRA.
  • You may be eligible to claim tax deductions on all or part of your IRA contribution.
  • IRA’s allow you the flexibility to make contributions based on your financial situation. Each year, you decide whether you want to contribute or not. You are never required to make IRA contributions.
  • Withdrawal or use of your traditional IRA assets may be made at any time. However, a 10% additional tax generally applies if you withdraw before you are age 59 1/2.
www.irs.gov
FAQs

Frequently Asked Questions

Are IRA contributions tax deductible?

To find out whether you are eligible for an IRA tax deduction, you must first determine if you (and/or your spouse, if applicable) are considered an active participant in an employer’s retirement plan. If you (and/or your spouse) are an active participant in a retirement plan at work, your IRA deduction limit depends on your modified adjusted gross income (MAGI).
Find out if you are eligible to deduct your IRA contributions.

If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more of your traditional IRAs of up to the lesser of:

  • $5,500 ($6,500 if you are age 50 or older), or
  • 100% of your compensation

For 2013, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced if your MAGI is:

  • More than $95,000 but less than $115,000 for a married couple filing a joint return or a qualifying widow(er),
  • More than $59,000 but less than $68,000 for a single individual or head of household, or
  • Less than $10,000 for a married individual filing a separate return.

For 2013, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced if your MAGI is:

  • More than $95,000 but less than $115,000 for a married couple filing a joint return or a qualifying widow(er),
  • More than $59,000 but less than $68,000 for a single individual or head of household, or
  • Less than $10,000 for a married individual filing a separate return.

For 2013, if you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $175,000 but less than $188,000. If your modified AGI is $188,001 or more, you cannot take a deduction for contributions to a traditional IRA.

Am I considered an active participant?

Generally, you are considered an active participant in an employer’s retirement plan if, for the given year, your account balance (in your employer’s retirement plan) has received any contributions or has had any forfeitures allocated to it. Employers must indicate if someone is an active participant on the person’s Form W-2. Therefore, one easy way to find out if you are considered an active participant is to refer to your W-2 form. If you are still unsure about whether you are considered an active participant, check with your employer.

How do I determine my MAGI?

Simply stated, MAGI is your adjusted gross income (AGI) from your Form 1040 or 1040A determined before any adjustments are made for IRA deductions, foreign earned income exclusions or foreign housing exclusions.

Why should I make contributions if they are not deductible?

Many people still make IRA contributions even if they don’t qualify for an IRA deduction. These contributions, referred to as nondeductible IRA contributions, still have many advantages in regards to helping individuals save for a financially secure retirement.

One advantage of nondeductible IRA contributions is that the earnings are tax-deferred. In other words, you don’t pay taxes on the earnings until you withdraw them from your IRA. Further, by not deducting these contributions on your tax return, you pay taxes on nondeductible IRA contributions in the year the dollars are contributed. Therefore, you do not pay taxes on these amounts when you withdraw them from your IRA.

The need to save for a secure tomorrow, combined with the power of tax- deferred earnings, makes nondeductible IRA contributions a promising alternative for individuals no longer eligible for deductible IRA contributions.

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