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roth ira contribution

Back-door Roth Blessed by Congress

The back-door Roth contribution method has always had an air of skepticism around it. With the passage of TCJA, the skepticism should be gone.

Three Year-End Financial Moves

As 2015 comes to a close here are a few things to consider so you can make the most of your money for 2015. Take full advantage of your IRA contributions. For those age 50 and over, you’re allowed $6,500 and if you’re under age 50, $5,500. It may also be of benefit to see if you qualify for a deductible IRA contribution or if contributing to a Roth IRA makes sense. Make the maximum contribution to your employer sponsored retirement plan. Granted, there may not be much time left in the year to do this, but there is plenty of time to do so for 2016. Many companies have access to their plans online and employees can change contribution amounts when necessary. If you’re not already doing so, consider saving at least 10 percent of your gross income. Aim for 15 to 20 percent if you can. Pay yourself […]

myRA? What’s the point?

After the President’s state of the union announcement of the new myRA account, my first reaction was: Did we need this?  What’s so “out of reach” about a regular Roth IRA?  And if there was a great hue and cry for this, why hasn’t the marketplace provided it already? After all, there are custodians who will provide a no-fee Roth IRA with no account minimum already (TD Ameritrade comes to mind). Plus, there are plenty of ways to get a bond-like return with no costs or account minimums as well. All that I can find that is different about the myRA accounts is that the bond investment (same as the TSP “G” fund) has downside protection – meaning that the funds in the myRA account will never reduce in value, only grow or stay the same. As with any gift (and downside protection is indeed a valuable gift), there is […]

Combining IRAs with Other Retirement Plans

Quite often, we are faced with several options for retirement savings.  With these decisions, it is important to understand what options are actually available to you – such as, can you contribute to both a 401(k) or 403(b) plan and an IRA in the same year? Combinations If you have a retirement plan available to you at your employer (401(k), 403(b) or traditional pension), depending upon your income you may be able to contribute to an IRA (a traditional, deductible IRA) in the same year.  See Annual Limits for Retirement Plans for the income limits. As you can see, these income limits are relatively low, so the likelihood of having the deductible IRA available to you is pretty limited.  On the other hand, the income limits for Roth IRA contributions are much higher, so for most this is a viable option. If your income is higher than the limits for […]

Don’t “Invent” Income!

Seems like a no-brainer – why would anyone want to “invent” income?  That just means you’ll have to pay tax, right?  Not always, especially if the income is for a minor and is only a relatively small amount – say, enough to qualify for the maximum Roth IRA contribution, for example. This is a follow-up to the article Open a Roth IRA for Your Child, where we talked about how beneficial it can be to set up one of these accounts for your child. One of the points we talked about in that article was how the account can only be funded with of the lesser of $5,000 (for 2010 and 2011) or total taxable compensation.  It’s very important to know what exactly can be considered “taxable compensation” for this purpose. Taxable Compensation Of course, any wages reported in Box 1 of a W-2 form from the employer is considered […]

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