Greetings!
It's the end of the year, have you contributed to your Roth IRA?
In many ways a Roth IRA is easier to understand than the Traditional IRA. Unlike a Traditional IRA, a Roth doesn't offer a tax deduction on contributions. Instead, you pay taxes now and enjoy a tax-free income for the rest of your life. Your children and grandchildren also inherit a tax-free account.
As long as you:
- Hold the Roth for at least five years and
- Take distributions no sooner than reaching age 59½.
The Roth IRA is something to consider.
An early withdrawal causes income tax on earnings. If this withdrawal is made prior to age 59 ½, it's also subject to a 10% Federal tax penalty. Similar to the Traditional IRA, a Roth allows penalty-free early withdrawals made for qualifying medical expenses, health insurance premiums, higher education expenses, a first-time home purchase, death or disability.
You may contribute to a Roth as long as you have adjusted gross income below the required thresholds. The following table summarizes the income limits for 2012.
Tax Year 2012
(Modified Adjusted Gross Income)
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Single
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Married Filing Jointly
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Eligible
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Less than $110,000
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Less than $173,000
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Contribution gradually phased out
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$110,000 to less than $125,000
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$173,000 to less than $183,000
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Not eligible to contribute
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$183,000 or more
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$183,000 or more
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In 2013, the limits for Single increase by $2,000 and for Married Filing Joint increase by $5,000. |
| Weekly Economic Update | |
INFLATION DECLINES
With gasoline costs falling 7.4% in November and energy costs dipping 4.1% on the whole, it is hardly a surprise that the federal government's Consumer Price Index fell 0.3% last month - its first decline since May. Core consumer prices rose 0.1%. The Producer Price Index also retreated 0.8% in November. In the past 12 months, America has seen 1.8% overall consumer inflation and 1.5% overall wholesale inflation. In AAA's December 13 survey, unleaded gasoline was averaging $3.29 per gallon nationally - down 68¢ from its 2012 peak. (1,2)
IF JOBLESS RATE HITS 6.5%, FED MIGHT RAISE RATES
In a remarkably specific policy announcement, the Federal Reserve's Open Market Committee said that the central bank would keep interest rates at historic lows "at least as long" as unemployment exceeds 6.5% and inflation is projected at 2.5% or less. If the jobless rate continues to fall as it has since July, the Fed could end up adjusting rates prior to 2015. The central bank also said it will buy more debt - it will purchase $45 billion of Treasury bonds per month starting in January. (1,3,4,5)
RETAIL SALES IMPROVE 0.3%
November's increase was a nice rebound from the 0.3% slip the Commerce Department had reported for October. Economists surveyed by Bloomberg had projected a November gain of 0.5%, however. (5)
STOCKS LOSE GROUND, NO PROGRESS IN WASHINGTON
Major stock indices declined last week as follows: S&P 500, -0.32% to 1,413.58; NASDAQ, -0.23% to 2,971.33; DJIA, -0.15% to 13,135.01. While President Obama and House Speaker John Boehner met privately last Thursday, there was no sign of a fiscal cliff deal emerging in the nation's capital. Oil settled Friday at $86.73, and gold settled Friday at $1,697.00. (6,7,8) |
| Market Summary |
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% Change |
Y-T-D |
1Yr Chg |
5-Year Avg | |
DJIA |
+7.51 |
+11.09 |
-0.31 | |
NASDAQ |
+14.06 |
+17.01 |
+2.55 | |
S&P 500 |
+12.40 |
+16.65 |
-0.74 |
(Source: msn.money.com, bigcharts.com, treasury.gov, treasurydirect.gov -12/14/12). Past performance is no guarantee of future results. Indices are unmanaged, and investors cannot invest in them directly. |
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Create a beautiful week!
Karl Frank, MBA, MSF
Certified Financial Planner (R)
A & I Financial Services LLC
303.690.5070
Citations:
1 - www.bloomberg.com/news/2012-12-14/consumer-prices-in-u-s-decline-more-than-forecast-in-november.html [12/14/12]
2 - www.businessweek.com/news/2012-12-13/wholesale-prices-in-u-dot-s-dot-fell-more-than-forecast-in-november [12/13/12]
3 - www.cnbc.com/id/100311233 [12/13/12]
4 - www.federalreserve.gov/newsevents/press/monetary/
20121212a.htm [12/12/12]
5 - www.bloomberg.com/news/2012-12-13/retail-sales-increase
-as-americans-snap-up-autos-electronics.html [12/13/12]
6 - www.usatoday.com/money/markets/overview/ [12/14/12]
7 - www.cnbc.com/id/100315158 [12/14/12]
8 - online.wsj.com/mdc/page/marketsdata.html [12/14/12]
Securities offered through Geneos Wealth Management, Inc., member FINRA/SIPC. Investment advisory services offered through A & I Financial Services LLC, registered investment advisor. |
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| Words for Thought |
"The first time someone shows you who they are, believe them."
Maya Angelou |
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Riddle of the Week
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What do the letter T and an island have in common?
Last week's riddle:
Victor is assigned to paint suite numbers on doors at an office building with 100 suites, which will be numbered from 1 to 100. How many times will he have to paint the number 8?
Last week's answer:
20 times - 8, 18, 28, 38, 48, 58, 68, 78, 80, 81, 82, 83, 84, 85, 86, 87, 88 (which has two eights in it), 89 and 98. |
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