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Georgia residents advised to look to the future

Many Georgia residents may be able to significantly reduce their tax obligations by placing their money in retirement structures. In particular, traditional IRA plans are notable for their ability to provide their owners with financial leeway in addition to serving as nest eggs for later years.

Under federal income tax law, traditional IRA contributions are tax-deferred. Depending upon their income, people are in general entitled to deduct all or a portion of their contributions, but those who do will be forced to pay taxes on their IRA income once they start taking withdrawals following their retirement. For those who anticipate having lower tax rates in their old age than they do presently, this strategy can result in overall savings, but it can work against individuals whose circumstances are reversed.

Advisers also point out that there are numerous rules limiting the use of IRAs and similar funds. People have until they are 70 1/2 years of age to start taking withdrawals on their own initiative before they become mandatory, and contributions are capped based on predetermined amounts and the age of the individual. Other factors, such as the existence of employer-provided retirement plans, can drive the contribution limit even lower. Should people exceed more than they can deduct in a single year, they must remove the excess and any associated earned income before taxes are due or pay a penalty.

Although they have numerous benefits, individual retirement plans aren't exempt from federal scrutiny. Like other investments, the earnings these retirement plans provide may be subject to tax liens and IRS levies. Those planning for their retirement shouldn't shy away from taking advantage of the tax benefits their IRAs facilitate, but it's important that they research their obligations before investing in specific structures.

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