An IRA is an important vehicle for accumulating money for retirement.

The IRA contribution limit is $5,000 for those under 50 and $6,000 for those 50 and over. The amount of your IRA may be deducted from your taxable income if:

• You’re not covered by an employer-sponsored pension plan.

• You’re a nonworking spouse.

Even if you participate in an employer-sponsored pension plan, you may still make contributions to an IRA. The amount you can deduct from your taxable income depends on your adjusted gross income.

The IRA deduction phaseout for married couples filing a joint return ranges from $90,000 to $110,000 AGI for the 2011 tax year. For singles, the IRA phaseout ranges from $56,000 to $66,000 AGI for the 2011 tax year.

Remember, the growth on money placed in an IRA grows tax-deferred under current tax laws. You do not pay taxes on the funds until you withdraw them, usually at retirement when you are in a lower tax bracket. However, because an IRA is intended for retirement, you may incur tax penalties if you withdraw the money before age 59 1⁄2 except in special circumstances.

You can withdraw funds from your IRA and not incur a federal penalty if you:

• Are a first-time home buyer ($10,000 limit).

• Are using the money to pay for a college education.

Any withdrawals will be subject to income taxes. It’s important to check with your tax advisor first before withdrawing

funds from your IRA.

— Jamont McRae, FIC is a managing partner and registered representative with Modern Woodmen of America.