VIEWING: Personal

IRAs

You’re working hard toward a comfortable retirement, but you still need sound financial planning. An IRA is the sensible financial package designed to safeguard and grow your money for your hard-earned retirement.

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Watch your money grow while it stays safe and secure.

  • With flexible contribution options, you are never required to make an IRA contribution
  • Your investment remains safe and secure
  • Access your funds whenever you wish
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Features & Benefits

Features and Benefits

  • Know that you are taking an important step toward a secure financial future
  • With flexible options, you are never required to make an IRA contribution
  • Annual contribution limit of $5,000; limit of $6,000 if you are aged 50 or older
  • Enjoy potential tax deductions
  • Receive tax-deferred earnings
  • Accessible savings option allows you to withdraw funds if you need them
Requirements & Fees

Requirements

  • Anyone who has earned income from working and does not reach age 7012 this year may contribute to an IRA on or before his or her tax-return deadline, excluding extensions

Fees

  • Monthly service fee: none
  • Early withdrawal penalties apply
  • Withdrawals are taxed as earned income
How It Works

How It Works

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 the following:

  • $5,000 ($6,000 if you are aged 50 or older)
  • 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 $92,000 but less than $112,000 for a qualifying widow(er) or a married couple filing a joint return,
  • More than $58,000 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 MAGI is more than $173,000 but less than $183,000. If your MAGI is $183,001 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 IRA contributions if they’re 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 that help 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.

Additional information on IRAs is available at your local BancorpSouth branch or irs.gov.

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