How is an individual retirement account (IRA) different from my retirement plan at work?
You can usually contribute much more to a retirement plan at work. The maximum annual contribution to an IRA in 2008 is $5,000 (or $6,000 if you are 50 years old or older). However, the maximum you can contribute on a pre-tax basis to most employer-sponsored retirement plans is $15,500 for 2008. Some plans also permit after-tax contributions. In addition, some employers may match a certain percentage of an employee’s contribution to a retirement plan at work. The money in a Traditional IRA compounds tax-deferred, like the money in your retirement plan at work, but your IRA contributions may or may not be deductible from your income. Deductibility of your IRA contributions depends on the amount of your adjusted gross income (AGI) and whether you participate in a retirement plan at work. However, contributions to your employer-sponsored retirement plan are made with pre-tax dollars, meaning your taxable income is reduced by your retirement plan contributions. Unlike your retirement plan
