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Traditional IRAs

When you invest in a Traditional IRA, your contributions may be tax deductible, and your contributions and earnings accumulate tax-deferred. You don't pay taxes until you withdraw funds from your account. This means that the money you would have otherwise paid in income taxes can stay in the account working hard for you.

Eligibility

  • If you have earned income, you contribute to a Traditional IRA up to the year you turn 70½.
  • Your ability to deduct your contributions depends on your filing status, the modified adjusted gross income (MAGI) shown on your 1040 tax return, and whether you are eligible to participate in a retirement plan at work.   

If you participate in a retirement plan at work, contact your tax or financial advisor to determine the amount you can contribute on a tax-deductible basis.

Contributions

  • Traditional IRAs may invest in different types of investments, including stocks, bonds, certificates of deposit (CDs) or mutual funds.1
  • The maximum you can contribute annually is $5,000 ($6,000 if you're over age 50). This is the combined limit across all IRAs you own.

Withdrawals

Funds may be withdrawn from a traditional IRA at any time. Any previously untaxed portion of your investment are subject to ordinary income taxes. If you're under the age of 59½, you'll also be subject to an additional 10 percent federal income tax penalty, unless your withdrawal is taken for one of the following reasons:

  • Qualified first-time home purchase (up to $10,000 per lifetime)
  • Death or disability
  • Qualified higher education expenses, which generally include tuition, books, supplies, equipment at an eligible educational institution
  • Medical expenses in excess of 7.5% of adjusted gross income (AGI)
  • Payment of health insurance premiums if unemployed
  • Substantially Equal Periodic Payments (SEPP), a plan that allows you to take annual distributions for five years or until you turn 59½, whichever comes last

1 If you are investing in a variable annuity through a tax-advantaged retirement plan such as an IRA, you will receive no additional tax advantage from the annuity.  Under these circumstances, you should only consider a variable annuity because of its other features, such as lifetime income payments and death benefit protection.

 

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Current tax planning strategies emphasize the deferral of current income taxes, on the basis that your federal income tax rate may be lower at retirement. As you decide how much to defer, please keep in mind that federal income tax rates are unpredictable and subject to significant fluctuation. It is possible that federal income tax rates at the time you take a distribution (e.g., at retirement) may be higher than tax rates at the time of deferral. Other factors, including any other sources of income and state income tax rates, may also change the tax bracket and overall tax rate to which you may be subject in the future. Please consult with your tax advisor for an individualized tax planning strategy and advice. The Hartford does not predict or in any way guarantee favorable tax results.

This information is written in connection with the promotion or marketing of the matter(s) addressed in this material. The information cannot be used or relied upon for the purpose of avoiding IRS penalties. These materials are not intended to provide tax, accounting or legal advice. As with all matters of a tax or legal nature, you should consult your own tax or legal counsel for advice.

The Hartford Mutual Funds are underwritten and distributed by Hartford Investment Financial Services, LLC.

Variable annuities are underwritten and distributed by Hartford Securities Distribution Company, Inc.


 

109572

Updated 11/06/2012
"The Hartford" is The Hartford Financial Services Group, Inc. and its subsidiaries.