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Traditional IRAs and Roth IRAs have been around for decades and the rules surrounding them have changed many times. What hasn\u2019t changed is that they can help you save for retirement on a tax-favored basis. Here\u2019s an overview.<\/p>\n
Traditional IRAs<\/strong><\/p>\n You can make an annual deductible<\/em> contribution to a traditional IRA if:<\/p>\n For example, in 2022, if you\u2019re a joint return filer covered by an employer plan, your deductible IRA contribution phases out over $109,000 to $129,000 of MAGI ($68,000 to $78,000 for singles).<\/p>\n Deductible IRA contributions reduce your current tax bill, and earnings are tax-deferred. However, withdrawals are taxed in full (and subject to a 10% penalty if taken before age 59\u00bd, unless one of several exceptions apply). You must begin making minimum withdrawals by April 1 of the year following the year you turn age 72.<\/p>\n You can make an annual nondeductible<\/em> IRA contribution without regard to employer plan coverage and your MAGI. The earnings in a nondeductible IRA are tax-deferred but taxed when distributed (and subject to a 10% penalty if taken early, unless an exception applies).<\/p>\n You must begin making minimum withdrawals by April 1 of the year after the year you reach age 72. Nondeductible contributions aren\u2019t taxed when withdrawn. If you\u2019ve made deductible and nondeductible IRA contributions, a portion of each distribution is treated as coming from nontaxable IRA contributions (and the rest is taxed).<\/p>\n Contribution amounts<\/strong><\/p>\n The maximum annual IRA contribution (deductible or nondeductible, or a combination) is $6,000 for 2022 and 2021 ($7,000 if age 50 or over). Additionally, your contribution can\u2019t exceed the amount of your compensation includible in income for that year. There\u2019s no age limit for making contributions, as long as you have compensation income (before 2021, traditional IRA contributions weren\u2019t allowed after age 70\u00bd).<\/p>\n Roth IRAs<\/strong><\/p>\n You can make an annual contribution to a Roth IRA if your income doesn\u2019t exceed certain levels based on filing status. For example, in 2022, if you\u2019re a joint return filer, the maximum annual Roth IRA contribution phases out between $204,000 and $214,000 of MAGI ($129,000 to $144,000 for singles). Annual Roth contributions can be made up to the amount allowed as a contribution to a traditional IRA, reduced by the amount you contribute for the year to non-Roth IRAs, but not reduced by contributions to a SEP or SIMPLE plan.<\/p>\n Roth IRA contributions aren\u2019t deductible. However, earnings are tax-deferred and (unlike a traditional IRA) withdrawals are tax-free if paid out:<\/p>\n You can make Roth IRA contributions even after reaching age 72 (if you have compensation income), and you don\u2019t have to take required minimum distributions from a Roth. You can \u201croll over\u201d (or convert) a traditional IRA to a Roth regardless of your income. The amount taken out of the traditional IRA and rolled into the Roth is treated for tax purposes as a regular withdrawal (but not subject to the 10% early withdrawal penalty).<\/p>\n Contact us for more information about how you may be able to benefit from IRAs.<\/p>\n \u00a9 2022<\/em><\/p>\n <\/body> Traditional IRAs and Roth IRAs have been around for decades and the rules surrounding them have changed many times. What hasn\u2019t changed is that they can help you save for retirement on a tax-favored basis. Here\u2019s an overview. Traditional IRAs You can make an annual deductible contribution to a traditional IRA if: You (and your […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,6,10],"tags":[8,11,12],"class_list":["post-15888","post","type-post","status-publish","format-standard","hentry","category-articles","category-individual-tax","category-news","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/15888","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=15888"}],"version-history":[{"count":0,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/15888\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=15888"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=15888"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=15888"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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