William Penn Life, 2019 (54. évfolyam, 2-5. szám)
2019-03-01 / 3. szám
Moneywise with Bob Bisceglia, National Sales Director THIS YEAR, we're seeing some of the most sweeping tax law changes in recent history. So, I thought I'd dedicate this month's column to discussing some of those changes, specifically those that relate to IRA contribution and income limits. Some of you might remember that I discussed this very topic about two years ago, but I believe it is important to share the new limits with you so you can plan and save accordingly. In a future column, I'll discuss the pros and cons of both traditional and Roth IRAs. Before we look at the new limits, let's review some of the basics. An IRA, or Individual Retirement Account, allows you to save money for retirement in a tax-advantaged way. An IRA is an account that is set up with a financial institution (such as William Penn Association) that allows an individual taxpayer to save for retirement with tax-free growth or on a tax-deferred basis. Here are some of the main types of IRAs: • Traditional IRA. With a traditional IRA, you make contributions with pre-tax money, money you may be able to deduct on your tax return. Earnings can potentially grow tax-deferred until you withdraw them, which is most favorable for retirement purposes. Many retirees find themselves in a lower tax bracket than they were in pre-retirement, so the tax deferral means the money may be taxed at a lower rate. • Roth IRA. With a Roth IRA, you make contributions with after-tax money, that is, money you have already paid taxes on. Your money may grow potentially tax-free, with tax-free withdrawals in retirement, provided that certain conditions are met (which I'll discuss in a future column). • Rollover IRA. With this type of IRA, you contribute money that is "rolled-over" from a qualified retirement plan into a traditional IRA. Rollovers involve moving eligible assets from an employer-sponsored plan-such as a 401 (k), 403(b), or other qualified pension plan-into an IRA. Tax law changes and your IRA Photos © Can Stock Photo/ designer491 Your next question may be: "Why should I invest in an IRA?" Many financial experts today estimate that you'll need 85% of your pre-retirement income in retirement to maintain your current standard of living. An employer sponsored plan, such as a 401 (k), might not be enough to accumulate the savings you need. Whether you choose a traditional or Roth IRA, the tax benefits allow your savings to grow more quickly than in a taxable account. The recent changes to the tax law brought about changes to the contribution and income limits for both 2018 and 2019. Remember that you have until April 15 of this year to make your IRA contribution for tax year 2018. I'll discuss contribution limits for both years in a bit. For now, please note that your contribution may be limited or eliminated altogether if you or your spouse are active participants in a company-sponsored pension plan or 401 (k). Here are the limits for tax year 2018 if you ARE NOT covered by a qualified plan at work, or if one spouse is covered and one isn't: If Your Filing Status Is... And Your Modified AGI Is... Then You Can Take... single, head of household, or qualifying widow(er) any amount a full deduction up to the amount of your contribution limit. married filing jointly or separately with a spouse who is not covered by a plan at work any amount a full deduction up to the amount of your contribution limit. married filing jointly with a spouse who is covered by a plan at work $189,000 or less a full deduction up to the amount of your contribution limit. more than $189,000 but less than $ 199,000 a partial deduction. $ 199,000 or more no deduction. married filing separately with a spouse who is covered by a plan at work less than $ 10,000 a partial deduction. $ 10,000 or more no deduction. If you file separately and did not live with your spouse at any time during the year, your IRA deduction is determined under the "single" filing status.______________________________________________________________________ 4 0 March 2019 0 WILLIAM PENN LIFE
