IRA

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2018 Roth and Traditional IRA Considerations

by Kristin P. Sinclair, A Accu Tax on September 26, 2018

Which is best for you ? Maybe both should be part of your 2018 retirement savings plans. With Traditional IRAs and other pre-tax retirement plans the contributions may be tax deductible in 2018. Your earnings grow tax-deferred until you withdraw them. Normally it should be best to withdraw Traditional IRA funds in retirement when you may have less income, and therefore pay less in taxes.

Roth IRA and other post-tax retirement plans you pay the taxes on the contributions, and your earnings should grow tax-deferred or tax-exempt. Those post-tax accounts that feature tax-exempt withdrawals after age 59.5 are excellent complements to your pre-tax IRA savings.

In retirement many people find they have unplanned needs for extra cash. For example: this could be the need for a new heating and cooling system; or something much more fun like an extra vacation ! Taking that extra cash from a pre-tax IRA should increase your current year income and current year income tax obligation. A double whammy could hit if more of your Social Security income is now taxable !

Conversely, it may be more desirable to with draw that extra cash from a Roth IRA or other post-tax retirement plan. Then you should not increase your current year income and your current year tax obligation. Voila – no double whammy from making more of your Social Security taxable.

Therefore the answer may be that Traditional IRAs and pre-tax retirement accounts are best in conjunction with Roth IRAs and other post-tax retirement accounts. It is important to balance your current year tax liability with your future retirement income needs. Please phone Kristin at (803)329-0609 if you need her to help you with your 2018 tax return.

Updated by Kristin P. Sinclair: A Accu Tax

in Charlotte NC and Rock Hill SC

September 26, 2018   (803)329-0609

 

Note: The IRS describes taxable compensation in general terms as what you earn from working. This specifically includes wages, salaries, tips, professional fees, bonuses, and other amounts you receive for personal services rendered. The IRS considers as taxable compensation all amounts properly shown on your W-2 in Box 1, provided that amount is not reduced by any amount entered in Box 11. For IRA purposes, scholarship and fellowship payments are taxable compensation only if shown on Form W-2 in Box 1.

More information is available at IRS.gov. See Publication 590-A and Publication 590-B.

 

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What is a Roth IRA?

What is a Roth IRA?

by Kristin P. Sinclair – A Accu Tax – September 19, 2018

A Roth IRA is a special kind of Individual Retirement Account that may allow your money to grow tax-free. You fund a Roth with after-tax or post-tax dollars – meaning you pay current income taxes on your contribution. In return for no up-front tax break, your money grows and grows tax free. Then you should qualify to withdraw your Roth IRA funds at retirement and pay absolutely no taxes !

That’s right, every penny goes straight into your pocket. This may be especially important in your early retirement years. Taking money from your Roth IRA should not impact the taxability of your Social Security Income.

Learn More

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What is a Roth IRA?

What is a Roth IRA?

by Kristin P. Sinclair – A Accu Tax – September 19, 2018

A Roth IRA is a special kind of Individual Retirement Account that may allow your money to grow tax-free. You fund a Roth with after-tax or post-tax dollars – meaning you pay current income taxes on your contribution. In return for no up-front tax break, your money grows and grows tax free. Then you should qualify to withdraw your Roth IRA funds at retirement and pay absolutely no taxes !

That’s right, every penny goes straight into your pocket. This may be especially important in your early retirement years. Taking money from your Roth IRA should not impact the taxability of your Social Security Income.

In summary there are two big differences between your Roth IRA and your Traditional IRA. Your Traditional IRA allows you a current income tax deduction that your Roth IRA does not allow. Your Traditional IRA funds are taxable when withdrawn; however, your Roth IRA withdrawals should be tax-free !

So do you Roth IRA or do you Traditional IRA ? Well actually in any given tax year you may be eligible to do both. You could put 25% or 50% of your eligible deductible contribution into your Roth IRA, and then put the balance into your Traditional IRA.

 

Are You Eligible ?

First things first. Roth IRAs have income eligibility limits, so if you make too much money, you can’t contribute to a Roth IRA. But with a median household income of about $50,000, most Americans qualify for Roth IRA contributions. (If your income is too high, you can convert some or all of the assets in your traditional IRA to a Roth IRA, but you’ll have to pay taxes on the entire amount you convert. For details, see more at IRS.gov.

Depending upon your tax-filing status, income, and your age, for tax year 2017 you can contribute up to $5,500. Those age 50 plus can contribute up to $6,500 in a Roth IRA. Your Modified Adjusted Gross Income (MAGI) may reduce the above maximums, and you should consult your tax advisor for your specific situation.

 

Updated by Kristin P. Sinclair: A Accu Tax

in Charleston SC and Rock Hill SC

September 19, 2018     (803)329-0615

KPS: More information is available at IRS.gov.

See Publication 590-A and Publication 590-B.

 

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What If You Should Inherit an IRA

by Kristin P. Sinclair – A Accu Tax

This article is being updated. Please check back again later.

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What is a Traditional IRA ?

by Kristin Sinclair  – March 22, 2019

An Individual Retirement Account (IRA) is a tax-favored savings or investment vehicle that you establish with a financial institution, or quite often with the help of a financial professional. The Traditional IRA, often referred to as the Original IRA, is one of the most popular IRAs. Normally you make a deductible contribution for the current tax year into your Traditional IRA. When you make a deductible contribution, that amount is deducted from your taxable income federal income tax purposes. This means you normally do not pay current income taxes on your deductible contributions, and only pay taxes later when you make withdrawals from your Traditional IRA. Thus, your deductible contribution becomes tax-deferred income. By deferring taxes, any dividends, interest payments, and capital gains can compound each year without being reduced by current taxes. Thus the Traditional IRA has the opportunity to grow much faster than a taxable account. Often retirees find themselves in a lower tax bracket than during their pre-retirement working years. Then the Traditional IRA funds should be withdrawn and taxed at a lower rate.

 

So far we have focused on the deductible Traditional IRA contribution. Nondeductible contributions can also be made into Traditional IRAs. These nondeductible contributions are not deducted from your current income for federal income tax purposes. They should not directly reduce your current income taxes; however, these nondeductible contributions can grow tax-deferred inside your Traditional IRA. Your household income, whether you or your spouse have access to an employer sponsored retirement account, help determine whether you qualify for a full or partial Traditional IRA deductible contribution. Employer sponsored retirement accounts include 401k plans, 457 plans, and 403b plans. Now is a great time to discuss with your tax advisor whether you qualify for a full or partial deductible contribution. Please also discuss the importance of keeping deductible and nondeductible contributions in separate Traditional IRAs.

 

The Traditional IRA has promising advantages for those qualified:

  • Depending on your circumstances, you may be able to deduct some or all of your IRA contributions from current income. Deductible contribution limits are $6,000, and $7,000 for those 50 and older.
  • Funds in your IRA, including earnings and gains, are normally not taxed until they are distributed.

 

Example:

Stephanie works in Charlotte NC and participates in her employer’s 401k retirement plan. She is single and her adjusted gross income should be less than $50,000 for 2019. Her tax advisor tells Stephanie that she should qualify for the full $6,000 Traditional IRA 2019 deductible contribution. Her tax advisor also recommends that Stephanie make that 2019 contribution as early as possible. This should change any future earnings from current taxation to tax-deferred.

 

Stephanie is engaged to Michael, and they plan to marry in June 2020. He is covered by a retirement plan at his Winthrop University position in Rock Hill SC. Michael has a much higher adjusted gross income than Stephanie. Their 2020 combined income after their upcoming nuptials may reduce or eliminate any future deductible Traditional IRA contributions. Once again, a discussion to have with their tax advisor.

 

Updated by Kristin P. Sinclair   (803)329-0615

in Rock Hill SC and Charlotte NC   March 22, 2019

KPS: More details and information are available at IRS.gov.

See Publication 590-A and Publication 590-B.

 

 

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IRA Risks and Expenses

Insurance Professional Donn Sinclair

by Donn J. Sinclair, MBA          March 26, 2019


A few words about risks, fees and expenses related to your investments. Before you move forward with any investment – you should carefully consider that investment’s objectives, risks, fees, and expenses. Not all exchange trade funds (ETFs) and mutual funds may be appropriate your specific situation. We all have our own unique risk temperaments and investment objectives that may or may not match any particular ETF or mutual fund.

Furthermore, before investing in any ETF or mutual fund, you should carefully read the prospectus or summary prospectus. This prospectus will outline the specifics of that fund; including that fund’s objectives, fees, and expenses. Said securities expressly to include ETFs and mutual funds. Remember that any investment’s past performance is no guarantee of future results. The information and opinions contained herein are for educational purposes only; and expressly do not constitute a solicitation for the purchase or sale of any securities. This educational information should not be relied upon as financial advice.

Updated in Rock Hill SC and Charlotte NC

by Donn J. Sinclair, MBA

(803) 329-0609
March 26, 2019

@Sinclair Financial Solutions is independently owned and operated. Donn J. Sinclair, MBA is insurance licensed in NC and SC (NIPR NPN#1722815). Investment Advisory Services offered through Prosperity Wealth Management, Inc., 2333 San Ramon Valley Boulevard, Suite #200 – San Ramon, CA 94583. Securities offered through Fortune Financial Services, Inc., 3582 Brodhead Road, Suite #202 – Monaca, PA 15061 Member FINRA/SIPC; branch office of record located at 948 Myrtle Drive Rock Hill, SC 29730. Sinclair Financial Solutions, Prosperity Wealth Management, and Fortune Financial Services, Inc are separate entities. SC Real Estate License #76530, and NRDS #554027312.

 

 

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