The IRA or Individual Retirement Account is such a stalwart that many pass it by. While it is more difficult to qualify with today’s tax laws, frequently it is still a very good plan.
While you may make a Non-Deductible contribution (no tax write off) to an IRA, we generally only recommend a Pre-Tax Deductible IRA for easier distribution at retirement. If you cannot deduct your IRA contribution, other plans are likely better.
Individual Retirement Account – IRA
Here are the important facts:
- Maximum Contribution amount of $5500 and $6500 for those age 50 or greater for 2017.
- Watch out – Contributions MUST be made by the regular filing date no matter if you file an extension.
- An IRA has numerous upper income limits if you are covered by another Qualified plan or if your spouse is qualified by a Qualified plan- make sure you are under these limits before contributing.
- If you or your spouse are NOT covered by a Qualified plan you are free to contribute to a Pre-Tax Deductible IRA regardless of your income level.
- IRA’s can accept all types of contributions from other sources such as 401k Rollovers, 501c3, SEP funds just to name a few.
- IRA’s have terrific death tax stretching techniques frequently not found in institutional plans such as the 401k.
- Investments within the IRA are extremely flexible allowing for terrific growth and diversification opportunity.
The most common scenario for a Pre-Tax Qualified IRA contribution is a W-2 employee with no retirement plan. If that is you this may be just the perfect vehicle to reach back and save money on last year’s tax, now!
Have a Great “Lower Taxes” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth