People who have earned income and their spouses who don't work, if they file a joint return, can contribute to a traditional IRA. With a traditional IRA, you may be able to deduct your contributions from your taxes, which can help lower your tax bill. All deductible contributions and profits you withdraw or that are distributed from your traditional IRA must be held by an approved IRA Gold custodian. See IRS Pub 501 for more information on IRA Gold custodians. In addition, if you are under 59 and a half years old, you may have to pay an additional 10% tax for early withdrawals, unless you qualify for an exception.
Anyone with earned income can open and contribute to an IRA, including those who have a 401 (k) account through an employer. The only limitation is on the total contributions to your retirement accounts in a single year. You may or may not be able to request a deduction from your contributions to a traditional IRA depending on whether you or your spouse are covered by an employer-sponsored retirement plan, your tax-reporting status, and your modified adjusted gross income (MAGI). As long as you're still working, there's no age limit to be able to contribute to a traditional IRA.
Initial tax relief is one of the main things that differentiate the rules of traditional IRAs from Roth IRAs, in which taxes are not allowed to be deducted for contributions. Depending on the type of IRA you use, an IRA can lower your tax bill when you make contributions or when you withdraw money when you retire. You can contribute to a Roth IRA as long as you have eligible earned income, no matter how old you are. If you don't qualify to make a deductible contribution, you can still invest money in a traditional IRA.
However, if you (or your spouse, if you are married) have a functioning retirement plan, such as a 401 (k) or 403 (b) plan, your modified adjusted gross income (MAGI) determines whether and to what extent your traditional IRA contributions can be deducted. There are annual income limits for deducting contributions to traditional IRAs and contributing to Roth IRAs, so there is a limit to the amount of taxes you can avoid investing in an IRA. Earned income is a requirement to contribute to a traditional IRA, and your annual contributions to an IRA cannot exceed what you earned that year. This means that you contribute to a Roth IRA with the money deducted from taxes and you don't pay taxes on profits or investment withdrawals.
If you don't have a retirement plan at work, your traditional IRA contributions are fully deductible.