Planning & Education | Traditional IRA

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Types of IRAs |

Traditional IRA

A traditional IRA works very simply. If you're under age 70½, for 2010 you can contribute up to $5,000 per year, but not more than your earned income for the year (less any contribution made to a Roth IRA), and invest it in one or more options that you select. Over time, your account grows as the value of your investments rises. The earnings on your contributions are not taxed until you withdraw them in retirement, so your account can grow faster than a taxable account.

If you are 50 years of age or older, you may have the additional benefit of catch-up contributions, which allows you to invest an extra $1,000 per year.

If you meet the following criteria, your contributions will be either fully or partially deductible from your current taxable income, so you can potentially save on your income taxes for the year:

Your contributions will be fully deductible if neither you nor your spouse is an active participant in an employer-sponsored retirement plan;

If you are covered by a retirement plan at work, a deduction for contributions to a Traditional IRA will be reduced (phased out) if your modified adjusted gross income (AGI) for 2010 is:

more than $89,000 but less than $109,000 for a married couple filing a joint return;
more than $56,000 but less than $66,000 for a single individual.

If you are married and file a joint tax return, you may also set up and contribute to a Spousal IRA for a non-working spouse. You can contribute up to $10,000 total to these two IRAs, but not more than your combined earned income, and not more than $5,000 to either one for the 2010 tax year.

Who should open a Traditional IRA? The ideal person to invest in a Traditional IRA is someone who thinks his/her federal income tax bracket will drop in retirement.

Next: Roth IRA

Call 1-800-DREYFUS, or contact us to learn more about how a Traditional IRA can help you build your retirement savings.

Investors should consider the investment objectives, risks, charges, and expenses of a fund carefully before investing. Download a prospectus that contains this and other information about a fund, and read it carefully before investing.