Traditional IRA

A Traditional IRA is a tax-advantaged arrangement that allows earnings and deductible contributions to grow tax deferred. That means you don’t pay income taxes on the earnings and deductible contributions of your IRA until you begin taking withdrawals, usually after you retire and possibly are in a lower tax bracket.

• Eligibility Requirements

  You must not attain the age of 70 1/2 during the year you contribute to a Traditional IRA. You must also have earned income (compensation) in order to contribute to a Traditional IRA.

• Tax Advantages

  Contributions may be deductible from your gross income on your federal income tax return for the year in which the contributions are made. Earnings grow on a tax-deferred basis. Deductible contributions and earnings are subject to federal income tax when withdrawn.

  The Saver’s Credit may provide a tax credit for those who save for retirement. You may be able to take a credit of up to $1,000 – up to $2,000 if filing jointly.

  The credit is designed to help offset part of your first $2,000 contributed to a Traditional IRA, Roth IRA, SIMPLE IRA, or 401(k) account by reducing the amount of federal income tax you owe dollar for dollar. However it is not a refundable tax credit. The credit ranges from 10 percent to 50 percent of your contributions and is based on several factors including your filing status, adjusted gross income, and tax liability. Special rules apply.

  Visit the IRS website or talk to your tax advisor for more information.

• Annual Contribution Limits

  Tax Year	Under Age 50	Age 50 or Older
  2013	$5,500	$6,500
  2012	$5,000	$6,000

  You can make annual contributions to a Traditional IRA of up to $5,000 for 2012 or $5,500 for 2013 or 100 percent of your earned income, whichever is less. An aggregate of $10,000 for 2012 and $11,000 for 2013 can generally be contributed per married couple ($5,000 per IRA for 2012 and $5,500 for 2013) provided that either you or your spouse has earned income of at least that amount. The annual contribution limits apply to the combination of all of your Traditional and Roth IRAs.

  If you are age 50 or older, you may make an additional $1,000 "catch-up" contribution to your IRA.

• Contribution Timing

  You can make annual contributions to a traditional or Roth IRA from January 1 through the tax-filing deadline (excluding extensions) for the year, generally April 15.

• Adjusted Gross Income

  If you are covered by a retirement plan at work, these deduction ranges apply to you:

  Your Tax Filing Status	Tax Year	Full Deduction	Partial Deduction	No Deduction
  Single/Head of Household	2013	Up to $59,000	$59,000 - $69,000	Above $69,000
  Married Filing Jointly	2013	Up to $95,000	$95,000 - $115,000	Above $115,000
  Married Filing Separately	2013	N/A	$0 - $10,000	Above $10,000
  Single/Head of Household	2012	Up to $58,000	$58,000 - $68,000	Above $68,000
  Married Filing Jointly	2012	Up to $92,000	$92,000 - $112,000	Above $112,000
  Married Filing Separately	2012	N/A	$0 - $10,000	Above $10,000

  
  Combined Adjusted Gross Income

  If you are not covered by a retirement plan at work but your spouse is, these deduction ranges apply to you:

  Tax Year	Full Deduction	Partial Deduction	No Deduction
  2013	Below $178,000	$178,000-$188,000	$188,000 and above
  2012	Below $173,000	$173,000-$183,000	$183,000 and Above

• Distribution Guidelines

  Distributions may be taken at any age – in specific amounts, as a lump sum, or as a series of systematic payments. Distributions are taxed at ordinary income tax rates for the year the distribution was made. Distributions taken before age 59 1/2 are generally subject to the 10 percent tax penalty unless applies. You’re required to start taking Required Minimum Distributions (RMD) from your Traditional IRA by April 1 of the year following the year in which you reach age 70 1/2. Calculate your RMD.

  State Farm® does not provide tax or legal advice. You should contact your tax or legal advisor for advice regarding your situation.

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