Posts Tagged ‘Roth IRA’

Save More For Retirement in 2015

Tuesday, December 2nd, 2014

As you work to secure your retirement, you may be pleased to find out about changes to several retirement-related items that may allow you to put a little more cash away in 2015. In October, the IRS announced several adjustments to the limitations previously set on retirement planning tools as a result of an increased cost-of-living. So what does that mean to you and your retirement plan(s) of choice? Take a look:

  • If you contribute to a 401(k), 403(b), 457 plan or a Thrift Savings Plan, the following changes could impact how you contribute:

–        You can now invest up to $18,000 annually – this is an increase up from $17,500.

–        If you’re 50 years old or older and are trying to catch-up on your retirement savings, you may now invest $6,000 annually. The previous catch-up contribution limit was $5,500.

  • If you contribute to an individual retirement account (IRA), you will see the following changes in 2015:

–        The annual limit and additional catch-up contribution limit for an IRA for individuals 50 years old and older will not change in 2015. The annual contribution is $5,500 and the catch-up contribution is $1,000.

–        Single filers and heads of household who are covered by a workplace retirement plan and have adjusted gross incomes (AGI) between $61,000 and $71,000 will no longer be eligible to receive a deduction for contributing to their traditional IRA. This has increased from $60,000 and $70,000 in 2014.

–        Married couples who file jointly, where one spouse makes an IRA contribution that is covered by a workplace retirement plan, will see an increased income phase-out range for taking the deduction as well. The new range is $98,000-$118,000 – up from $96,000-$116,000.

–        If you’re an IRA contributor, not covered by a workplace retirement plan, but are married to someone who is covered, the deduction is phased out if you and your spouse’s income falls between $183,000 and $193,000 – up from $181,000 and $191,000.

–        The phase-out range for a married taxpayer who files a separate return and who is covered by a workplace retirement plan will not change in 2015. The range remains $0 to $10,000.

  • If you make contributions to a Roth IRA, you will see the following changes:

–        The phase-out range for married couples filing jointly is $183,000 to $193,000 – an increase from $181,000 to $191,000.

–        The phase-out range for single filers and heads of household is $116,000 to $131,000 – an increase from $114,000 to $129,000.

–        The phase-out range for a married individual who files a separate return is unchanged.

As we approach the end of the year, there’s not a better time to evaluate your current retirement plan situation and determine if you need to make any changes for 2015. To learn more about how these retirement plan changes could impact your financial situation, email Rea & Associates.

By Paul McEwan, CPA, MT, AIFA (New Philadelphia office)

 

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Need Some Cash Now?

Friday, July 19th, 2013

Are you in the market for a new home? Or maybe you’re looking to purchase a new car for your daughter or son? Don’t have enough cash for a down payment? No problem. There’s a nice workaround that can provide short-term relief for your immediate need.  (more…)

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How Do Your Avoid IRS Penalties on Your IRA?

Friday, September 21st, 2012

With our government requiring more cash each year, there is growing sentiment is the financial community that the IRS is becoming more vigilant in obtaining all revenue available related to Individual Retirement Accounts (IRAs). According to a recent article, the Treasury Inspector General for Tax Administration estimates that the IRS failed to collect as much as $286 million of revenue in 2006 and 2007 alone. From a political aspect, it is easier to raise revenue by simply enforcing the existing rules, than it is to cut spending or pass a new tax increase. (more…)

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So the Grass Wasn’t Greener? Time to Reverse Your Roth IRA Conversion

Tuesday, September 27th, 2011

If you converted a traditional IRA to a Roth IRA account last year, you may be facing an account that is worth much less than when you converted it. But you might also be facing a tax bill on value you no longer have. You do have an option, but only if you act quickly – reverse your 2010 Roth conversion.

If you converted your traditional IRA to a Roth IRA last year, the transaction triggered a taxable distribution from the traditional IRA, followed by a contribution to your Roth account. That tax will be based on the value of the traditional IRA on its conversion date. That means if your account is worth less now, you will owe taxes on money that no longer exists.

How to Reverse Your Roth IRA

Thankfully, the Roth conversion regulations allowed for the ability to reverse the conversion – but only if you do so before October 17. This involves completing the proper paperwork with your IRA custodian or trustee. When properly filed, the IRS considers your account as being “recharacterized” from a Roth account back to traditional IRA status. It’s as if the conversion never happened, and your tax liability disappears.

You’ll need to amend your 2010 tax return to allow for the reversal, or adjust your 2010 return if you have filed for an extension. Your reversal of the Roth conversion this year will also trigger some additional documentation requirements for your 2011 tax return.

Reconverting to Roth

Now that you’ve lessened your tax liability on phantom income that vanished due to the market’s versatility, you might consider using the down market to your advantage. You can reconvert your now traditional IRA back to a Roth – and pay less tax on it than you would have paid last year. You must wait 30 days after the reversal to reconvert it. Reconverting your traditional IRA account to a Roth can make sense if you expect your assets to appreciate quickly.

Your tax professional can assist you in amending your 2010 tax return or adjusting your extended 2010 return. He or she can also walk you through the reporting process that will be required should you decide to reconvert your IRA.

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Should I Pay Taxes Now or Later for My Roth IRA?

Wednesday, March 30th, 2011

If you took advantage of last year’s law change allowing you to convert your IRA to a Roth IRA, you face a big all-or-nothing tax payment decision on April 18: pay the taxes on your pretax contributions and gains in 2010, or split the tax bill between 2011 and 2012. (more…)

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What are the 2011 Pension Plan Contribution Limits?

Friday, November 12th, 2010

The IRS recently announced cost of living adjustments affecting dollar limits for pension plans and other retirement-related items for 2011. The limits generally remain unchanged or reflect small inflation adjustments. Here are the highlights: (more…)

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How does the Small Business Jobs Bill Impact 401(k) Plans?

Wednesday, November 3rd, 2010

The Small Business Jobs Bill, which was recently signed into law by President Obama, includes a provision that will add some additional planning opportunities for participants of 401(k) plans with Roth provisions.  Roth IRA accounts are after-tax monies that grow tax-free.  Distributions from the accounts can be made without any tax consequence.  This provides additional flexibility to taxpayers when planning for retirement or death transfers.  One of the main estate planning benefits of Roth IRA accounts is that the minimum required distribution provisions do not apply to them. (more…)

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Should I Convert to a Roth IRA?

Friday, May 14th, 2010

We’ve heard a lot about the benefits of converting your traditional IRA to a Roth IRA over the past several months, and you probably already know the decision has many considerations. Here are three more to consider: (more…)

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