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The IRS has made Traditional IRAs available to investors for more than 25 years. As long as you have earned income and are under age 70½, you can contribute to a Traditional IRA. You can also make contributions from your earned income on behalf of your "non-wageearning" spouse. In this case, you would set up two accounts: one for you and one for your spouse. Depending upon your earned income for the year, you can contribute up to the maximum amount (see chart at right for annual maximums) to each account every year.
Potential tax deductibility
One of the attractions of a Traditional IRA is that, depending on your financial situation, you may be able to deduct these IRA contributions from your taxable income. This will provide a tax savings that actually reduces the cost of your IRA contribution. Smart investors invest these tax savings in other taxable accounts to take full advantage of growth opportunities.
Can You make deductible contributions?
 *Source: Internal Revenue Service, Publication 590. This chart provides general information for determining 2003 IRA deductions. If you are married and filing separately, different rules apply. Please consult your tax advisor for more information.
**Modified Adjusted Gross Income (MAGI) is your adjusted gross income without taking into consideration the tax deduction for a contribution to a Traditional IRA plus certain other deductions and exclusions.
†For example, you are single, under age 50, covered under a company-sponsored plan and your Modified Adjusted Gross Income is $42,000. If you want to deduct the highest amount allowed, the permissible deduction is $2,400. $3,000 x [($50,000-MAGI)/$10,000] = deduction limit for the IRA holder.
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