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ira contribution limits

Your 401k and IRA in 2018

Recently, the IRS just announced the contribution limits for 401k plans (including 403b and 457 plans) as well as IRAs. Additionally, the IRS also announced changes to the income phase-outs for traditional IRA deductibility and Roth IRA eligibility. Let’s start with the 401k plans. For 2018, the IRS increased the contribution limits to $18,500, up $500 from $18,000 last year. The catch-up contribution for those age 50 or over remains unchanged at $6,000. $500 may not seem like much, but think of it this way – you get to give yourself a $500 raise! For those interested in maxing out their 401k plans in 2018, here’s the breakdown depending on whether you’re paid monthly, 24 weeks per year or 26 weeks per year. If you’re paid monthly, the contribution is $1,541.66. This brings you just eight cents under the $18,500 max annually. If you’re paid 24 weeks per year, then […]

2017 Retirement Plan Contribution Limits

The IRS recently published the new contribution limits for various retirement plans for 2017.  These limits are indexed to inflation, and as such sometimes they do not increase much year over year, and sometimes they don’t increase at all. This year for the third year in a row we saw virtually no increases contribution amounts, and the income limits increased for slightly as they did for 2016. IRAs The annual contribution limit for IRAs (both traditional and Roth) remains at $5,500 for 2017 (third year without an increase).  The “catch up” contribution amount, for folks age 50 or over, also remains at $1,000. The income limits for traditional (deductible) IRAs increased slightly from last year: for singles covered by a retirement plan, your Modified Adjusted Gross Income (MAGI) must be less than $62,000 for a full deduction; phased deduction is allowed up to a MAGI of $72,000.  This is an […]

Don’t Forget to Make Your IRA Contribution by April 18!

When filling out your tax return, it’s allowable to deduct the amount of your regular IRA contribution when filing even though you may not have already made the contribution. You’re allowed to make an IRA contribution for tax year 2015 up to the original filing deadline of your tax return. This year, that date is April 18, 2016. The problem is that sometimes we file the tax return way early in the year, and then we forget about the IRA contribution. As of the posting of this article, you have 1 week to make your contribution to your IRA to have it counted for tax year 2015. What To Do If You Miss the Deadline If you don’t make the contribution on time, you’re in for some nasty surprises unless you take some corrective actions. If you find yourself on April 19, 2016 without having made your IRA contribution and […]

2016 IRA MAGI Limits – Married Filing Separately

Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately, who did not live with his or her spouse during the tax year, is considered Single and will use the information on that page to determine eligibility. For a Traditional IRA (Filing Status Married Filing Separately): If you are not covered by a retirement plan at your job and your spouse is not covered by a retirement plan, there is no MAGI limitation on your deductible contributions. If you are covered by a retirement plan at your job and your MAGI is less than $10,000, you are entitled to a partial deduction, reduced by 55% for every dollar (or 65% if over age 50), and rounded up to the nearest $10.  If the amount works out to less than $200, you are allowed to contribute at least $200. If you are covered by a retirement […]

2016 MAGI Limits for IRAs – Married Filing Jointly or Qualifying Widow(er)

Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately, who did not live with his or her spouse during the tax year, is considered Single and will use the information on that page to determine eligibility. For a Traditional IRA (Filing Status Married Filing Jointly or Qualifying Widow(er)): If you are not covered by a retirement plan at your job and your spouse is not covered by a retirement plan, there is no MAGI limitation on your deductible contributions. If you are covered by a retirement plan at work, and your MAGI is $98,000 or less, there is also no limitation on your deductible contributions to a traditional IRA. If you are covered by a retirement plan at your job and your MAGI is more than $98,000 but less than $118,000, you are entitled to a partial deduction, reduced by 27.5% for every dollar […]

2016 MAGI Limits – Single or Head of Household

Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately who did not live with his or her spouse during the tax year, is considered Single and will use the information on this page to determine eligibility. For a Traditional IRA (Filing Status Single or Head of Household): Note: These limits are unchanged from 2015. If you are not covered by a retirement plan at your job, there is no MAGI limitation on your deductible contributions. If you are covered by a retirement plan at work, if your MAGI is $61,000 or less, there is also no limitation on your deductible contributions to a traditional IRA. If you are covered by a retirement plan at your job and your MAGI is more than $61,000 but less than $71,000, you are entitled to a partial deduction, reduced by 55% for every dollar over the lower limit […]

Does Your IRA Include After-Tax Money?

Or: There’s Basis In Them Thar Funds! If you have an IRA that has certain types of funds in it, you may be in a position to have some of your distributions treated as post-tax, meaning that you will not have to pay ordinary income tax on the distribution as you normally would.  But what kinds of money is considered post-tax? The common way to have post-tax funds in an IRA is to make non-deductible contributions to the account.  This occurs when you are not eligible to make deductible contributions due to income restraints, but you still wish to make IRA contributions for the year. For example, if in 2012 you have income in excess of $112,000 ($68,000 if single) and you’re covered by a retirement plan at work, you can still contribute up to $5,000 (plus $1,000 if over age 50) to an IRA – you just can’t deduct […]

Once you reach age 70½ – No more IRA contributions

When you reach age 70½, you are no longer eligible to make regular contributions to an IRA account.  A common misconception is that if you are still actively working, this age restriction doesn’t apply.  The reason for this misconception is that this is true for 401(k) accounts and other qualified retirement plans (like a 403(b), 457 plan or other). Another misunderstanding about this rule is that it applies to all IRAs.  Actually, this rule only applies to traditional IRAs – not Roth IRAs.  A Roth IRA has no age restriction for contributions to the account.  As always though, you must have earned income for the tax year in which you are making contributions to the Roth IRA. This age restriction for traditional IRAs applies only to regular contributions – whether deductible or non-deductible.  Rollovers into or out of IRA accounts are not restricted by age.

What If My Employer Doesn’t Match My 401(k) Contributions?

Should I continue to make contributions to my 401(k)? Is there something else that I should make contributions to instead? As you may recall, the recommended order for retirement savings contributions is normally as follows: 401(k) contributions up to the amount that the company matches max out your Roth or traditional IRA contributions for the year (as applicable) max out the remainder of the available 401(k) contributions make taxable investment contributions In the situation where your employer doesn’t match your contributions to a 401(k) plan, the order of contributions is more appropriate if you bump up the Roth or traditional IRA contributions.  In other words, just eliminate the first bulletpoint. Now, the choice of Roth IRA versus the traditional IRA for your contributions is dependent upon your income and the tax impacts.  For example, you would not be eligible to make a deductible traditional IRA contribution if your Modified Adjusted […]

2012 Retirement Plan Limits

Image via Wikipedia The new limits for retirement plans in 2012 have just recently been published.  The details of these new limits are below: IRA The contribution limit (and therefore the deductible contribution limit) for a traditional IRA remains the same in 2012 as in 2011 – at $5,000.  The catch up provision, available to taxpayers age 50 or better, also remains the same at $1,000. If you’re a Single filer and covered by a retirement plan via an employer, the deductibility phases out when your Adjusted Gross Income (AGI) is over $58,000 and phases out completely at an AGI of $68,000.  This is an increase of $2,000 over the 2011 phase-out range. If you’re Married and filing jointly and the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is between $92,000 and $112,000, also up from 2011 by $2,000. If you’re not […]

Roth IRA for Youngsters

Image via Wikipedia Many times it is among the best of ideas to establish a Roth IRA for your child.  This way, your child can benefit from the long-term growth in the account and have a very good head start on retirement savings for later in life.  There are other benefits, including the fact that retirement funds are not included when financial aid is being calculated for college expenses, as well as providing funds for the child to use when the time comes to buy a house. One thing can cause a real problem though: if you undertake to make contributions to a Roth IRA for your child that aren’t based in fact.  What’s that?  How can this be?  So there’s a way you can make contributions to Roth IRA that aren’t based in fact?  What fact is that?? The rules for making contributions to Roth IRAs (actually, any IRA) […]

NonDeductible IRA Contributions: Good or Bad Idea?

Image by Sean MacEntee via Flickr If you find yourself in the position of having too high of an income to make a deductible contribution to your IRA for the year ($110,000 for joint filers in 2011, $66,000 for Single and Head of Household), you may be wondering if it’s a good idea to make a non-deductible contribution to your IRA. There are two opposing camps on this issue, and the deciding factor is how you’re intending to use the funds in the near term. It’s a Good Idea If you’re intending to convert your IRA to a Roth and your income is too high to just make the contribution directly to the Roth account, the non-deductible IRA may be the right choice for you.  This way you’re effectively working around the income limitations of the Roth contribution ($179,000 for joint filers in 2011 or $122,000 for single or head […]

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