What happens if one spouse is an active participant in a company-sponsored retirement plan and the other is not,or does not have earned income?
The non-active participant spouse can fully deduct his/her IRA contribution if their joint adjusted gross income is less than $167,000 in 2010 and $169,000 in 2011. The deductibility phases out for married couples with an AGI between $167,000-$177,000 in 2010 between $169,000 and $179,000 in 2011. No dedutions are allowed when AGI is greater than the upper limit.
Thursday, November 17, 2011
Tax Benefits and Penalties of an IRA
Each IRA has its own unique package of benefits. The benefits can include tax-deductible contributions, tax-deferred income and tax-free income. Congress understands the importance of saving for retirement and education, and has established incentives for taxpayers to save for these milestones on their own.
Each IRA has a 10% penalty if certain conditions are not met when money is withdrawn. Also, the withdrawn amount may be included as taxable income. In some situations, after federal and state taxes and the 10% penalty, IRA owners may net or walk away with only about half of the withdrawn amount because of the taxes and penalties incurred.
Each IRA has a 10% penalty if certain conditions are not met when money is withdrawn. Also, the withdrawn amount may be included as taxable income. In some situations, after federal and state taxes and the 10% penalty, IRA owners may net or walk away with only about half of the withdrawn amount because of the taxes and penalties incurred.
Thursday, November 3, 2011
IRA!?
What is a Traditional IRA?
A tax-deferred account where anyone under the age 70 1/2 who has earned income may contribute up to $5,000 annually ($6,000 if over age 50). The penalty for early withdrawal, which is before you are 59 1/2, is ten percent. An exception to this penalty is if the withdrawal is for an education expense or up to $10,000 for your first home purchase.
What is a Roth IRA?
An after-tax contribution to a retirement savings in exchange for a tax free income in retirement. If you think you will be in a higher tax bracket when you retire then a Roth IRA would be the better choice for you. You can contribute 100% of your compensation up to the limits of, single is $5000 and married is $6000. You are able to withdraw any funds tax and penalty free and do not have a minimum contribution amount after you are 70 1/2.
A tax-deferred account where anyone under the age 70 1/2 who has earned income may contribute up to $5,000 annually ($6,000 if over age 50). The penalty for early withdrawal, which is before you are 59 1/2, is ten percent. An exception to this penalty is if the withdrawal is for an education expense or up to $10,000 for your first home purchase.
What is a Roth IRA?
An after-tax contribution to a retirement savings in exchange for a tax free income in retirement. If you think you will be in a higher tax bracket when you retire then a Roth IRA would be the better choice for you. You can contribute 100% of your compensation up to the limits of, single is $5000 and married is $6000. You are able to withdraw any funds tax and penalty free and do not have a minimum contribution amount after you are 70 1/2.
Retirement Opportunities
Investing in your retirement can be very overwhelming. There are so many types of services that are offered but the big question is where do you start?
I would first start asking yourself what sort of lifestyle would you like when you retire? Do you expect to maintain the life you are living now, or do you want to be able to travel and do things that you enjoy, isn't that what retirement should be all about?
Most companies offer a form of retirement plan such as 401k, 403b, and 457b. These are great to take advantage of especially if the company will match your contributions to a certain percent.
Other services offered are Traditional and Roth IRA's that are used for saving for retirement.
I would first start asking yourself what sort of lifestyle would you like when you retire? Do you expect to maintain the life you are living now, or do you want to be able to travel and do things that you enjoy, isn't that what retirement should be all about?
Most companies offer a form of retirement plan such as 401k, 403b, and 457b. These are great to take advantage of especially if the company will match your contributions to a certain percent.
Other services offered are Traditional and Roth IRA's that are used for saving for retirement.
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