The earnings compound and produce additional earnings which are also exempt from current taxation. Your retirement fund continues to grow without taxation until you start receiving payments. These contributions and interest earnings accumulate and are used as savings for retirement. A qualified deduction may be taken even if you do not itemize your deductions. Upon withdrawal, tax deferred interest is taxable as ordinary income.
Deductible contributions are taxable as ordinary income upon withdrawal.
Nondeductible contributions are not taxable upon withdrawal. A tax penalty also applies to such early withdrawals unless made under certain types of lifetime income payments, or unless they result from death or disability. Your American Family agent can help answer your IRA questions at no obligation. Make an appointment today to discuss IRAs with your local American Family agent . All rights reserved.