Your IRA the Easy Way With an Automatic Savings Plan
Individual Retirement Account (IRA) is one of the four main components
of a financially secure retirement. Anyone with wages under the age
of 70 ½ can contribute, the annual contribution limits have been
increasing and there are tax benefits.
The amount you can accumulate depends on two factors - what you contribute
and how much the funds grow within the account. Of course, the more
contributions you make and the higher the earnings rate, the more you
will accumulate. No one can control (or accurately predict) what will
happen with interest rates or the stock market. But, you control how
much and how often you contribute.
The contribution limit for 2018 is $5,500 for those under the age of
50 and $6500 for those 50 and above. If you make annual contributions
of $5500 for 20 years and earn 6%, your IRA will grow to just over $202,000.
Ten years' contributions will grow to over $72,000. The keys are to
start early and contribute every year. Waiting just one year or missing
a year can cost you plenty.
It Easy with an Automatic Savings Plan
an automatic savings plan to make it easy. If you are under the age
of 50 and start in January, you can make your full contribution with
only $458.33 each month. If you are 50 or above, it only takes $541.66
each month. Use the calculator below to determine how much you can contribute
each month depending on your age and when you start.
Your Automatic Savings Today
is no easier way to save than with an automatic savings plan.
Rules for Regular IRAs
limits for 2018 - Those under the age of 50 can contribute $5,500
and those ages 50 and above can contribute $6,500. The only requirement
is that you have wages in excess of your contribution level.
of contributions - Contributions are tax deductible if you are not
eligible to participate in your employer's qualified retirement
plan or if your Adjusted Gross Income is below certain levels (For
2018, $63,000 for single filers and $101,000 for those filing jointly.).
- Tax benefits
- The earnings on funds within an IRA are not subject to income
tax when earned.
- You must start taking distributions in the year you reach age
70 ½ and distributions are taxable.
- Penalties for
early withdrawals - Withdrawals before age 59 ½ are subject
to a penalty tax of 10% along with regular income taxes.
Roth IRAs have the same contribution limits, however contributions are
not allowed for those with Adjusted Gross Income above certain levels.
Contributions are not deductible, earnings are tax-deferred like a regular
IRA and there are no distribution requirements. Early withdrawals are
subject to the 10% penalty tax.
Your Tax Advisor
Everyone's tax situation is different and you may want to discuss your
situation with a qualified tax advisor to learn how the rules may apply
in your situation.