How to Contribute to a Traditional IRA

It's fun to spend money, no doubt, but it makes sense to sock away some dough for the future. An Individual Retirement Account (IRA) is an ideal way to save for retirement. Rules for IRAs have evolved, you can now even access their proceeds, without penalty, to fund higher education and first-time home buyer expenses before you retire. A traditional IRA account provides you with an immediate tax benefit as well. If you have compensation from a job, you're all set to contribute to a traditional IRA.

Step 1

Contact a bank, brokerage, mutual fund company or other financial institution that offers IRAs. Tell the representative that you want to open a traditional IRA. You can also conduct the entire process of opening an account online with many firms. You'll need to provide basic personal information as well as other details such as your Social Security number and the names of those you want to be account beneficiaries when you open your account. Initial investment amounts and funding options vary from firm to firm.

Step 2

Set up an automatic transfer between your bank account and your traditional IRA account. You can do this as part of the initial application process or after the fact in most cases. Typically, this process involves providing your bank's routing number and your checking or savings account number to provide a link between the two accounts. Alternatively, send in a check, wire funds or transfer assets from another firm to fund your account.

Step 3

Arrange a schedule of contributions to your traditional IRA. Options are to invest a lump sum or invest periodically. Most financial institutions allow for automatic investments on a set schedule, often monthly or quarterly. As IRS Publication 590 explains, you are allowed to contribute a total of $5,000 a year ($6,000 if you are 50 years of age or older) to your IRAs each year, as of 2010.

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