What Is Traditional IRA Eligibility?
The issue that many potential investors have with the various retirement plans on offer is the fact that they may not be eligible due to age or income. Age limits mean that there is a retirement plan suitable for every stage of life but income limits are hard to overcome. Reaching slightly over the income limits of a retirement fund can make you ineligible for the fund and severely affect your choices regarding a pension and the benefits thereof. Traditional IRA eligibility is never based on income unless it is regarding the tax deductibility eligibility. However, age can be a big issue. To qualify for a traditional IRA, an investor must be earning an income of any size and have not yet reached the age of 70 ½.
As most people have retired by the age of 70 ½, there is not too many restrictions on a traditional IRA eligibility and almost anyone is permitted to invest in one of these personalized retirement plans. Even the non-working spouse of an investor is entitled to have their very own personal traditional IRA fund as this retirement plan cannot be a joint account. As long as the money is invested into the fund, and the non-working spouse is under the age of 70 ½, they are eligible to establish a traditional IRA. This is a very wide net of people eligible to invest into a traditional IRA fund which makes it one of the easiest to embark upon. Flexibility in the eligibility of the fund simply expands the amount of people who stick with this type of retirement plan.
Traditional IRA eligibility in regards to tax deductibility is another matter. There are various factors that come into play here and they revolve around an investor's age and income primarily but also important is the fact of whether they are an active participant in an employer sponsored retirement plan. If they are considered to be an active participant, they will not be eligible to receive tax deductions on their contributions as per the rules of the traditional IRA.
Those who are not active participants are generally eligible for full deductibility while those non active investors who have a spouse that is an active participant may be eligible for partial deductibility. The income of the investors is the next point that needs to be considered. Those earning up to a certain cut off point are eligible for full deductibility while those who earn slightly more can only receive partial tax deductibility. In the cases of investors who earn above the maximum limit and who are either active participants themselves or have a spouse who is, they are not covered under a traditional IRA plan's eligibility for tax deductions.
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