IRA Strategies
2018 Update
According to Forbes, “despite lots of noise leading up to the passage of the tax reform bill, retirement planning was left mostly alone.”
So, no worries!
Unless, like me, you did something stupid during the year.
I made an unfortunate mistake last year. I needed some cash and I had a variable annuity with a Life Insurance company. I thought it’d be a good idea to cash it in rather than using money from a retirement account. I withdrew about $55,000 and recently received a 1099 indicating I owed taxes on $27,000 in capital gain. Whoops and ouch.
So my strategy is to use a traditional IRA to defer part of these taxes. Since I’m over 50 I can put $6500 into a traditional IRA for me and an additional $6500 for my wife. That’ll defer my tax bill on $13,000 this year until later, when I’m not making any money. (Hmmm…I hope that never happens).
Hopefully, I’ll get some good advice from my accountant for deferring some of the other taxes I owe.
Let’s review the current IRA limits
Contribution Limits |
2017 |
2018 |
Traditional IRA |
||
| Traditional IRA Contribution Limit | $ 5,500 | $ 5,500 |
| Traditional IRA Contribution Limit if 50 or over | $ 6,500 | $ 6,500 |
| If you’re covered by retirement at work:* | ||
| IRA Income Limits (AGI) – For single filers phase out starts at: | $ 62,000 | $ 63,000 |
| Ineligible at | $ 72,000 | $ 73,000 |
| IRA Income Limits- For married filers phase out starts at: | $ 99,000 | $ 101,000 |
| Ineligible at: | $ 119,000 | $ 121,000 |
| *Your deduction is allowed in full if you (and your spouse, if you are married) aren’t covered by a retirement plan at work. | ||
Roth IRA |
||
| Roth IRA Contribution Limit | $ 5,500 | $ 5,500 |
| Roth IRA Contribution Limit if age 50 or over | $ 6,500 | $ 6,500 |
| Roth IRA Income Limits (AGI) – For single filesr phase out starts at: | $ 118,000 | $ 120,000 |
| Ineligible at | $ 133,000 | $ 135,000 |
| Roth IRA Income Limits- For married filers phase out starts at: | $ 186,000 | $ 189,000 |
| Ineligible at: | $ 196,000 | $ 199,000 |
Minimizing Your Tax Bill is an American Pastime.
Be sure to pay you fair share but, try not to overpay. Do your research or get advice from a good CPA. And remember, Credit Unions have IRAs and their fees are generally very reasonable. It’s a good place to get started until you have enough money to justify the services of a good Financial Planner.
Other Strategies
- You can take advantage of IRAs until the year your turn 70 1/2 as long as you have earned income.
- You can make a contribution for 2017 until April 15, 2018.
- For tax deferment. IRAs are as good as it get.