Is Your Family Missing Out on IRA Savings?

Is Your Family Missing Out on IRA Savings?

As we head into March, we would like to remind you that it’s NOT TOO LATE to make contributions to your IRA accounts or your children’s or grandchildren’s, or even your parent’s IRA accounts for calendar year 2017.

You have until the earlier of when you file your taxes or April 17th, 2018 to make a 2017 contribution. When April 15th fails on a Sunday, Federal taxes are due the following Tuesday (April 17th, 2018 in this case).

IRA accounts, especially Roth IRA accounts, are terrific for young people in lower tax brackets to begin a systematic and life-long savings strategy. Inheriting Roth accounts can be an important part of your family’s estate plan. There are some important rules that must be followed and several flavors of IRA accounts, and we can help guide you.

Here are some initial guidelines: To contribute to an IRA account, the owner must have earned income in 2017. The contribution is limited to the lesser of earned income or the federally-set annual contribution limits of $5,500 (with a $1,000 catch up amount available to those 50 or older in 2017).

A working spouse can make a contribution for a non-working spouse. Do not waste this valuable deduction!

Also, the person earning the income does not have to make the contribution. A parent can contribute for a child, provided the child does have the earnings. That is, a child that has earned income during the year (summer camp, after school, etc.) can have the parent or grandparent contribute.

TRADITIONAL IRAs MAYBE TAX DEDUCTIBLE

Subject to income limits and whether you are covered by a retirement plan at work, these funds grow tax deferred. Even if a contribution is not deductible, making a non-deductible contribution provides some excellent planning opportunities.

One opportunity for high earners is called the ‘Back door Roth’. Basically you are converting your nondeductible Traditional IRA contribution to a Roth IRA. This technique works best when a person has no balance or a small balance in their IRA accounts. For 401k participants there could be opportunities for the “MEGA Back Door Roth”.  This is Back Door Roth on steroids.  Contact us to review your current 401k plan to see if you can take advantage of this significant savings opportunity.

ROTH IRAs ARE NOT TAX DEDUCTIBLE

The funds grow tax free (if held for more than 5 years and the owner is at least age 59.5). You can withdraw your contributions without tax or penalty at any time. There are income limitations on Roth contributions but none on conversions or 401k Roth contributions.

If you have any questions or would like to discuss in greater detail please contact your AEPG® Financial Life Planner or Gary Shor directly.


Important Disclosure
Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. This material may contain certain forward-looking statements. These forward looking statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by American Economic Planning Group, Inc. (“AEPG”) will be profitable. Definitions of any indices listed herein are available upon request. Please remember to contact AEPG if there are any changes in your personal or financial situation or investment objectives so that we can review our previous recommendations and services, or if you wish to impose, add or modify any reasonable restrictions to our investment management services. This article is not a substitute for personalized advice from AEPG and nothing contained in this presentation is intended to constitute legal, tax, accounting, securities or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. Investment decisions should always be made based on the investors specific financial needs, objectives, goals, time horizon and risk tolerance. This information is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of AEPG. Descriptions of AEPG’s process and strategies are based on general practice and we may make exceptions in specific cases. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.