Final answer:
To make annual contributions to a Traditional IRA, a single filer must be under age 70.5 and have earned income. There are tax-deferred benefits with a Traditional IRA, while a Roth IRA offers tax-free growth. Early planning and contributions to retirement accounts are essential for a comfortable retirement.
Step-by-step explanation:
To be eligible to make annual contributions to a Traditional IRA, a single filer must be under age 70.5 by the end of the year. There is no requirement to be employed full-time; however, you must have earned income, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment. There is also no minimum age requirement, so as long as you have earned income, you can contribute to a Traditional IRA. Starting in the year you turn 72, you must take required minimum distributions (RMDs).
An Individual Retirement Account (IRA) is a tool for retirement savings that provides tax advantages for retirement savings. A Traditional IRA allows individuals to direct pretax income toward investments that can grow tax-deferred. Contrastingly, a Roth IRA allows for contributions to be made with after-tax dollars, providing tax-free growth and withdrawals. Additionally, people can contribute to retirement savings through workplace accounts like 401(k)s, which also have tax advantages.
It's important to start planning for retirement early to maximize the amount of time your money can grow. While you may be contributing to Social Security through your job, most experts agree that this alone will not be enough to fund a comfortable retirement. Therefore, making regular contributions to an IRA or a 401(k) can be a critical part of retirement planning.