A Traditional IRA is a common and very beneficial retirement savings option. Current contribution limits allow anyone under age 70½ with earned income to contribute 100 percent of earnings up to $5,000 for years 2008, and up to $6,000 for those age 50 and over. If you were to contribute the entire $5,000 (or $6,000, if applicable) you may be able to deduct the amount on your tax return, depending on your marital status, your income and whether you or your spouse participate in an employer-sponsored retirement plan. The ability to deduct an IRA contribution on your tax return means you don’t pay taxes on the money you put in your IRA until you take it out (ideally at retirement). Chances are, that when you’re in retirement, you’ll also be in a lower tax bracket, making your tax deferred IRA savings even more valuable! Plus, you do not pay any taxes on any interest your contributions earn until you choose to take money out of your IRA.
If you are eligible for an IRA contribution for a particular tax year the latest date to make the contribution is generally April 15 of the following year. When April 15 occurs on a weekend or legal holiday the next business day becomes the deadline.