Saving for retirement is important. An IRA could be what you’re looking for. An IRA is a way to set aside money for retirement and also provides income tax advantages.
“IRA” stands for:
There are many types of IRAs, each with their own tax advantages, including traditional, Roth, Educational, SEP, and SIMPLE. Two of the most common are:
There are certain requirements that apply to both traditional and Roth IRAs:
In order to make contributions, you must have taxable compensation.
Modified Adjusted Gross Income (MAGI) limits are set by the IRS, and determine whether or not your contributions to a traditional IRA are deductible and whether or not you are eligible to make Roth IRA contributions.
Taxable compensation that is eligible for an IRA includes:
Taxable income that is not eligible for an IRA includes:
The deadline to contribute to an IRA is any time during the year, or up until April 15 the following year. But keep in mind, the sooner you open an IRA and begin making contributions, the longer your money will have to grow, potentially leaving you with a better end result.
Note: If you are over age 50, you may be able to make an additional catch-up contribution after making your maximum annual contribution. Refer to the IRS website or talk with your professional tax advisor to see if you’re eligible.
Converting a traditional IRA to a Roth IRA, simply put, is a way to pay income taxes now and avoid paying them later. As of Jan. 1, 2010, income restrictions on converting most pre-tax retirement accounts to Roth IRAs have been removed. Any tax incurred on a conversion is paid in the year of conversion.
To be eligible for a Roth IRA conversion, you must file as single or married filing jointly.
WoodmenLife offers several options to help you save for retirement. Talk with your local WoodmenLife Representative to determine whether an IRA is right for you and your retirement goals.
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