Retirement planning is essential to ensure that you have the money you need when you stop working and want to enjoy your golden years. For most people, Social Security benefits aren’t sufficient to live on after retirement. Saving enough to provide you with a steady income and money to do the things you want during retirement can be a challenge, and starting early and making informed choices is key to financial success.
Fortunately, there are some tools to help you achieve financial security when you are a senior. One of the most important things to consider as you move forward with retirement planning is how you can take advantage of those tools. IRAs, or individual retirement accounts, are a good example of a valuable tool used in securing a financially stable retirement.
There are different kinds of IRAs and there are specific rules for each of the different types of individual retirement accounts. The White River Junction retirement planning lawyers at Unsworth LaPlante, PLLC can provide invaluable assistance with the process of choosing the right IRA for your retirement plan. Give us a call as soon as possible so you can take advantage of the tax breaks that IRAs provide and so you can ensure you are doing everything you can to have money for a secure retirement.
Types of IRAs to Consider For Your Retirement Planning
The IRS summarizes different types of retirement plans to consider. These include:
- Individual Retirement Arrangements (IRAs)
- Roth IRAs
- 401(k) Plans
- 403(b) Plans
- SIMPLE IRA Plans (Savings Incentive Match Plans for Employees)
- SEP Plans (Simplified Employee Pension)
- SARSEP Plans
Not all of these different kinds of accounts are IRAs or are available to everyone. For example, 401(K) and 403(B) plans usually are offered by employers and you cannot create this type of account on your own unless your employer offers it. While the self-employed can sometimes use a self-employed 401(K) to save for retirement, there are few people who are able to take advantage of this option. Simple IRA plans and SEP-IRA plans are also limited to small businesses, sole proprietors, and/or those who earn non-wage income.
Because of the limits on many of the different types of IRAs and tax-advantaged retirement accounts, most people end up opening one of two different kinds of retirement accounts as part of their retirement plan. These include traditional IRAs and Roth-IRAs.
Traditional IRAs let you put in money tax free, so you get to deduct whatever you invest in the IRA up to the maximum limits. With Roth IRAs, you don’t get a deduction when you put the money in and you invest with post-tax dollars. You do, however, get to allow the money to grow tax free and can make tax free withdrawals.
Both a traditional and Roth IRA could be useful, but you need to know the rules. For 2016, the maximum total contribution limits to both traditional and Roth IRAs is $5,500. If you are 50 or older, your maximum contribution is higher as you are permitted to contribute $6,500. However, if your taxable compensation over the course of the year was below this amount, the maximum you may contribute is the amount of compensation that was taxable.
If you are single or filing as the head of household and you make $61,000 or under as of 2015, you can take a tax deduction for the full amount of your IRA contribution up to contribution limits. If you make between $61,000 and $71,000, you can take a partial deduction. If you make $71,000 or greater, you are no longer able to take a deduction if you are covered by a retirement plan at work.
If you are married filing jointly, you can take a full deduction up to contribution limits if your household income is less than $98,000. If your income is between $98,000 and $118,000, you can take a partial deduction. However, if your income is $118,000 or higher and you or your spouse is covered by a retirement plan at work, there is no deduction permitted.
How a White River Junction Retirement Planning Lawyer Can Help
A White River Junction retirement planning lawyer can help you to decide what kind of IRA is the right one for your retirement plan. To learn more about retirement planning options, join us for a free seminar or contact us to get personalized advice that is tailored to your situation.
You can give us a call at (802) 879-7133 or contact us online today so we can get started on helping you to choose an IRA which can assist in achieving financial security in your retirement years.