Don't Overlook IRAs
IRA assets have grown at an average annual rate of
13 percent since 1990, topping the $3 trillion mark in
2003. Though these numbers are impressive, it's
important to note that the growth has come primarily
from rollovers and market performance rather than
additional IRA contributions.
Why aren't people utilizing IRAs more effectively?
Perhaps the reason lies in increased complexity and
confusion about IRA eligibility and deductibility. In an
era where people are concerned about future Social
Security benefits and outliving their income, it can be
costly to overlook the tax benefits and tax
deductibility of IRAs.
Who Can Contribute?
Anyone under age 701/2 with earned income can
contribute to a traditional IRA. Although age is not a
limitation with a Roth IRA, contributors still must
have earned income, and total income cannot exceed
- $160,000 if married filing jointly
- $110,000 for single or head of household (also
married filing separately if spouses did not live
together during the year)
How Much Can Be Contributed?
The combined amount that individuals can contribute
to traditional and Roth IRAs in 2005 has increased to
$4,000 ($4,500 for those aged 50 and older).
Increases in contribution limits are scheduled through
How Much Is Deductible?
Contributions to traditional IRAs may be fully or
partially deductible, and you can deduct more of your
contributions today than ever before. The amount
you can deduct will depend on your income, age, and
participation in an employer-sponsored retirement
plan. Contributions to Roth IRAs are not tax
Even if you can't deduct traditional IRA contributions
in a given year, you can take advantage of the tax-
deferral benefits of IRAs.
What About Distributions?
Withdrawals from traditional IRAs are subject to
ordinary income taxes, and required minimum
distributions must begin once you reach age 70½.
Distributions from Roth IRAs, on the other hand, are
free of federal income taxes, and withdrawals of
contributions can be made at any time.
Traditional and Roth IRAs are flexible retirement
savings tools that can play a number of roles in your
portfolio. Please call if you would like to discuss IRA
or rollover options.