IRAs and Roth IRAs
An Individual Retirement Account (IRA) is a personal savings plan that allows clients to set aside funds for their retirement. Contributions are tax deductible. Investments made within traditional IRAs grow tax-deferred (meaning you pay income taxes on the contributions and ALL the investment growth when removing the money).
A Roth IRA is similar to an IRA except you fund it without taking a deduction. However, the money in a Roth IRA is still allowed to grow tax-free and be removed tax-free in retirement.
The following are the current and future contribution limits.
Year 2019 IRA and Roth IRA contribution limit is $6,000.
Catch-up contribution over age fifty is an extra $1,000 (total of $7,000).
Not everyone can contribute to an IRA.
For Single-Filers Covered by a Company Retirement Plan—the phase-out is now $64,000 to $74,000 of AGI (Adjusted Gross Income).
For Married-Filers Covered by a Company Retirement Plan—the phase-out is $103,000 to $123,000 of AGI. For a married filer who isn’t covered by a company retirement plan, but whose spouse is covered, the phase-out is $193,000 to $203,000 of AGI.
Not everyone can contribute to a Roth IRA.
For Single & Head of Household—the phase-out is $122,000 to $137,000.
For Married Joint-Filers—the phase out is $193,000 to $203,000.
If you have questions about whether an IRA or Roth IRA is a good planning tool for you or if you have questions about the phase out rules, please contact our office and we’d be happy to help.