WHAT IS A TRADITIONAL IRA?

�The Wallet Doctor�
A financial newsletter for long-term investors!
Volume 1, Issue 4
Dr. Scott Brown, Ph.D.

WHAT IS A TRADITIONAL IRA?

With a traditional Investment Retirement Account (IRA) you pay taxes when you take the money out at retirement in the future. Make sure that this account is really worth opening in your situation because what you put in the account today may be fully deductible, partially deductible or non deductible, depending upon your income and other retirement coverage. If you contributions are not fully deductible then this account is probably not for you.

The traditional (and Roth IRAs) allow you to save $3,000.00 in 2004 and $4,000.00 in 2005. If you are over 50 years old you can save an additional $500.00 as catch-up. You put the maximum amount in if you (or your spouse) are not covered at any time during the tax year by a retirement plan, including a 401(k) account, at work. If you can�t afford to save the maximum then just do the best that you can.

If you are single or a head-of-household taxpayer with annual adjusted gross income (AGI) between $40,000 and $50,000 and are eligible for a company retirement plan, your deduction will be reduced. Deductions are also limited for married couples filing jointly or qualifying widows or widowers who earn from $60,000 to $70,000 per year.

Even if you don�t have a retirement plan at work, your deduction may be limited if your spouse, with whom you file a joint return, has a company pension plan. In this case, your deduction will be reduced if your joint income is between $150,000 and $160,000. No deduction is allowed if your AGI exceeds $160,000. If you have a non-working spouse, he or she can contribute up to $3,000 ($3,500 if 50 or older) to an IRA also as long as the two of you together make at least as much in annual income as you contribute.

As I said before profits and income from investments are not taxed until you retire and begin withdrawing funds. You can pay capital gains taxes on you stock market profits and then withdraw funds, without penalty, after you reach age 59�. If you take out money before then, you usually will face a 10 percent penalty, plus taxes on the withdrawn amount. Under certain circumstances, you can take penalty-free distributions before age 59�. In the year that you will turn 70� you can no longer make contributions to your account. In fact, at that age you must start withdrawing money from the traditional IRA or face additional penalties. If you already have a traditional IRA you can learn how to buy stocks low and sell them back high in my course �The Blue-Collar Base Bonanza � What the insiders [definitely] don�t want you to know!� You can get more course information on my website at www.BonanzaBase.com.

This account is ideal for individuals in high tax brackets who cannot open or contribute to a Roth IRA and anticipate facing a lower tax bracket upon retirement. In other words, if you earn a lot of money now, pay a lot of taxes, can open a standard Roth IRA, and take the full deduction when you contribute then this account may be good for you. This is especially true if you anticipate low income in your retirement years such that you will also be in a lower tax bracket.

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The mission of the Delano Max Wealth Institute is to guide investors toward a secure retirement with the peace of mind that comes from the elimination of fear of investing and recognition of abundance within us instead of perception of lack in the world outside of us. We are driven by compassion for our fellow sentient beings, not fear of them, recognizing the equality and self evident rights of all, and are committed to conducting business based on the principles of the golden rule. Because of this commitment, we promise the following: To teach our students in the most simple, plain language wherever possible. To teach our students how to save consistently in increasing increments with increasing wealth: To teach our students how to diversify: To teach our students how to avoid large losses as best we know how: To teach our students how to turn away anything that sounds too good to be true: To share every secret we know about investing with investors who participate in our trainings. Finally, the Delano Max Wealth Institute promises to lead the way with innovative courses and seminars, bringing benefits to all who are associated with us.

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