With the increase in income tax rates for investments instituted on January 1, 2013, there is more incentive than ever to make IRA contributions. Much is to be said for deferring money to an IRA, especially for taxpayers in brackets in excess of a 50% tax rate. Moreover, taxpayers under age 70½ can make maximum annual contributions for your spouse and for yourself, even if only one of you has taxable compensation. And if neither spouse participated in a work retirement plan, all of your contributions may be deductible.
Those of you who are age 70½ and older can’t make regular contributions to a traditional IRA. However, you can still contribute to a Roth IRA and make rollover contributions to a Roth or traditional IRA regardless of your age if you and your spouse have earned income below a certain level. Similar to a traditional IRA contribution, if only one spouse has earned income (even if only from a part-time job), you can still potentially establish a Roth and make contributions for both spouses.
For 2013, the maximum amount you can contribute to all of your traditional and Roth IRAs is the smaller of $5,500 ($6,500 if you’re age 50 or older), or your taxable compensation for the year. The IRA contribution limit doesn’t apply to rollover contributions and qualified reservist repayments.
For younger individuals, a significant amount of money by the time you reach retirement age can be saved by making annual Roth contributions. For example, an annual contribution of just $5,000 for 30 years could grow to $566,416. In other words, after 30 years, that person would have invested $150,000 in the form of Roth contributions, which could potentially grow at an estimated 8% average rate, earning $416,416. This entire amount could be withdrawn tax-free upon reaching age 59½.
Succinctly, making IRA contributions is a great strategy for increasing your wealth, especially in light of the new tax rates and notwithstanding whether or not the contributions are tax deductible. The earlier you can get started on this strategy, the better off you will be!
If we can assist you with making an IRA contribution for the 2012 and 2013 tax years, or if you would like a complimentary review of your tax and financial plan, please let us know.
Best regards,
Rollins Financial, Inc.
Those of you who are age 70½ and older can’t make regular contributions to a traditional IRA. However, you can still contribute to a Roth IRA and make rollover contributions to a Roth or traditional IRA regardless of your age if you and your spouse have earned income below a certain level. Similar to a traditional IRA contribution, if only one spouse has earned income (even if only from a part-time job), you can still potentially establish a Roth and make contributions for both spouses.
For 2013, the maximum amount you can contribute to all of your traditional and Roth IRAs is the smaller of $5,500 ($6,500 if you’re age 50 or older), or your taxable compensation for the year. The IRA contribution limit doesn’t apply to rollover contributions and qualified reservist repayments.
For younger individuals, a significant amount of money by the time you reach retirement age can be saved by making annual Roth contributions. For example, an annual contribution of just $5,000 for 30 years could grow to $566,416. In other words, after 30 years, that person would have invested $150,000 in the form of Roth contributions, which could potentially grow at an estimated 8% average rate, earning $416,416. This entire amount could be withdrawn tax-free upon reaching age 59½.
Succinctly, making IRA contributions is a great strategy for increasing your wealth, especially in light of the new tax rates and notwithstanding whether or not the contributions are tax deductible. The earlier you can get started on this strategy, the better off you will be!
If we can assist you with making an IRA contribution for the 2012 and 2013 tax years, or if you would like a complimentary review of your tax and financial plan, please let us know.
Best regards,
Rollins Financial, Inc.
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