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We understand that saving for retirement can be a challenge. Not only do you need the day-to-day discipline to stick with your savings strategy, but you have to keep up with IRA rules and regulations. We can help. One common retirement savings tool is a traditional IRA.
Traditional IRAs are tax-deferred, which simply means you generally won't pay taxes on the money in your IRA until you start withdrawing it. At that time, the money you take out of your IRA will be taxed just like regular income. On the front end, the money you deposit today into your traditional IRA may be deductible from your taxable income.
Many people find themselves in a lower tax bracket when they retire. This means that while you're working, you may get a bigger tax break on IRA contributions. Then, when you withdraw the money later in life, it's potentially taxed at a lower rate.
Beginning with tax year 2020, an individual is eligible to contribute to a traditional IRA, regardless of age, as long as they have taxable compensation. 2019 and prior years, contributions could not be made for the year an individual turned 70½ and older. For 2020 and 2021, you can generally contribute up to $6,000.
If you're 50 or older, you can make a $1,000 "catch-up" contribution.
Your ability to deduct contributions today generally depends on your participation in your employer's retirement plan and your income.
If you are:
|Traditional IRA MAGI Limits|
|How You File Your Taxes
||Amount of Contribution Deductible
|Single or Head of Household
||$65,000 or less||$66,000 or less||Full|
|$75,000 or more||$76,000 or more||None|
|Married Filing Jointly or Qualifying Widow(er)
||$104,000 or less||$105,000 or less||Full|
|$124,000 or more||$125,000 or more||None|
|Married Filing Separately
||Less than $10,000||Less than $10,000||Partial|
|$10,000 or more||$10,000 or more
Does a traditional IRA seem right for you? Let's talk. We invite you to meet with one of our financial advisors and start the conversation.
*Withdrawals are subject to IRS rules and regulations. Please see your qualified tax professional for all the relevant information before making a decision.
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