Money IQ“Save Yourself” and “Define Your Own Future”…
“The Mayan’s were wrong on the end of the world, it was just the end of their calendar” and “Congress and the President have additional issues to address regarding the government’s fiscal stability and looming debt ceiling issue.”
Since uncertainty is a fact, some things are certain, “Define your Own Future” … contribute to an Individual Retirement Account.
Most of us save for retirement as a participant in our Employer’s Qualified Retirement Plan (QRP), such as a 401(k) Plan or 403(b) Plan.
In addition to that QRP, you should consider additional retirement savings using a Traditional Individual Retirement Account (Traditional IRA) or a Roth Individual Retirement Account (Roth IRA.)
What are the differences between the two (2) IRA types?
TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNTS:
If you are shopping for an immediate tax savings for 2013 by sheltering earned income the Traditional IRA is the IRA for you.
If your Modified Adjusted Gross Income (MAGI) meets the Internal Revenue Service (IRS) thresholds for a deductible contribution you can shelter $5,500 of earned income with a $1,000 catch-up provision if over 50 years old ($6,500) in a Traditional IRA and the earnings on the IRA are tax deferred.
Retirement age is defined as 59-and-one-half for penalty free withdrawal.
Traditional IRA Contribution Limits and Deductibility MAGI Thresholds:
|
Tax Year |
IRA Contribution Limit |
IRA Contribution Limit for Age 50+ |
||||
|
2013 |
$5,500 |
$5,500 plus $1,000 |
||||
|
2012 |
$5,000 |
$5,000 plus $1,000 |
||||
|
Filing Status |
Tax Year |
Full Contribution |
Partial Contribution |
No Contribution |
||
|
Single |
2013 |
< $59,000 |
$59,000 and $69,000 |
Over $69,000 |
||
|
Single |
2012 |
< $58,000 |
$58,000 and $68,000 |
Over $68,000 |
||
|
Married, Joint |
2013 |
< $95,000 |
$95,000 and $115,000 |
Over $115,000 |
||
|
Married, Joint |
2012 |
< $92,000 |
$92,000 and $112,000 |
Over $112,000 |
||
|
Married Separate |
2013 |
n/a |
< $10,000 |
Over $10,000 |
||
|
Married Separate |
2012 |
n/a |
< $10,000 |
Over $10,000 |
||
*Source: IRS Publication 590 for additional information on Deductibility of Traditional IRA Contributions.
ROTH INDIVIDUAL RETIREMENT ACCOUNTS:
Roth IRAs offer tax-free savings growth on contributions that have already been taxed. Instead of the immediate tax-savings that a Traditional IRA provides, Roth IRA tax-savings is at retirement with tax-free qualified distributions.
Contributions to a Roth IRA for 2013 are the same as Traditional IRAs. Retirement age is defined as 59-and-one-half.
Roth IRAs have no age restrictions and contributions from earned income can continue after 70-and-one-half.
ROTH IRA Contribution Limits and Eligibility MAGI Thresholds:
|
Tax Year |
Roth IRA Contribution Limit |
Roth IRA Contribution Limit Age 50 + |
||||
|
2013 |
$5,500 |
$5,500 plus $1,000 |
||||
|
2012 |
$5,000 |
$5,000 plus $1,000 |
||||
|
Filing Status |
Tax Year |
Full Contribution |
Partial Contribution |
No Contribution |
||
|
Single |
2013 |
< $112,000 |
Between $112,000 and $127,000 |
Over $127,000 |
||
|
Single |
2012 |
< $110,000 |
Between $110,000 and $125,000 |
Over $125,000 |
||
|
Married Joint |
2013 |
< $178,000 |
Between $178,000 and $188,000 |
Over $188,000 |
||
|
Married Joint
|
2012 |
< $173,000 |
Between $173,000 and $183,000 |
Over $183,000
|
||
|
Married Separate |
2013 |
n/a |
< $10,000 |
Over $10,000 |
||
|
Married Separate |
2012 |
n/a |
< $10,000 |
Over $10,000 |
||
*Source: IRS Publication 590 for additional information on calculating Roth IRA contribution amounts.
It is your choice when saving for retirement. By saving for retirement, you can insure your future does not have a fiscal cliff. The calendar continues and your future can be financially healthy with a few good choices.
Editor’s note: Tammy M. Thorn is the Vice President in LANB’s Lobby Services Group – Los Alamos. She has been with LANB for 34 years.
- Look for Money IQ every Wednesday in the Los Alamos Daily Post.
