Bill Gerhard: Hi! I am Bill Gerhard Director of Financial Services for AAA. I am discussing how to save for retirement using IRAs. Let's look at Traditional IRAs in more detail. You can open a Traditional IRA if you are under 701/2 years old and receive taxable earned compensation.

Contributions to a traditional IRA are made with pre-taxed dollars and give you a tax break your working years. It allows interest, dividends and capital gains to accumulate tax free, until you retire and you need to withdraw funds.

How much you can contribute to your IRA depends on your age, your overall income determines how much of what you contribute is tax deductible. You can begin by taking money out of your IRA without a federal penalty when you are 591/2.

You must begin taking requirement on distributions by age 701/2 to avoid penalties, your distribution is taxed as ordinary income. When you begin to withdraw funds, that money will probably be taxed at a lower rate, because if you are no longer working, you'll be in a lower tax bracket.

In some very specific situations you may withdraw a specific amount from your IRA without federal penalty if you meet certain IRS criteria. Consult a financial planner or tax consultant to make sure you qualify for an exemption.

If you want to make an IRA part of your financial strategy. What are your options? You can open a Traditional IRA at a bank, brokerage, mutual fund company or through some affinity groups such as AAA, which has made special arrangements with banks and insurance companies.

Shop around, because fees, interest rates and annual percentage yield vary widely between financial institutions. Don't overlook online providers, their low operating cost may allow them to offer higher rates. AAA offers the information in this video series for educational purposes only. Carefully consider objectives, risks, expenses and tax implications before investing. In our next video, look at another type of individual retirement account, the Roth IRA.

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