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5 Must-Know Facts – The Motley Fool



Retirement storage is important, and the best way to get started with retirement goals is to open an IRA. Getting started is easy, but trying to navigate through your choices can be confusing to make the best decision for your financial situation.

In particular, there are five facts about the IRA that you really need to know. Get hold of them and you'll be well on your way to choosing the best way forward to reach your financial retirement goals.

1. There are two types of IRAs: Traditional and Roth

Most investors can choose from two different types of IRAs. Traditional IRAs allow most people to make a tax deduction for the amount they contribute and give them immediate tax savings. However, when making withdrawals from a traditional IRA at retirement, you usually pay income tax on the amount you withdraw.

  Jar marked retirement with coins and money in it.

Image Source: Getty Images.

Roth IRA are different. You do not get tax deductions for contributions to a Roth IRA, but you can withdraw from a Roth in retirement without paying any taxes in most cases. If you are eligible to contribute to one, then those who have high tax brackets now often prefer a traditional IRA contribution, while those who are in low tax may currently do better with a Roth IRA.

2. How much you can contribute to an IRA

Grant limits for the 2019 year went up from 2018. If you are younger than 50, then the 2019 limit is $ 6,000, up $ 500 from the 2018 level. Those who are 50 or older can add an additional $ 1000, making the total deposit limit $ 7,000.

These limits assume that you have at least as much profit from a job or self-employed person. If you have less revenue earnings, your deposit limit will be lower. However, spouses can open the spousal IRA that effectively let them use their spouse's profits instead of their own, so be sure to check and see if you're eligible on that front even if you're not working for pay. [19659003] 3. Revenue Framework for Contributing to Roth IRAs in 2019

Both traditional and Roth contribution limits are the same, but Roth IRAs impose additional restrictions on participation. If your income exceeds certain levels, you are not allowed to contribute to a Roth. Others whose income falls into a phasing-out area may have a lower maximum than those previously listed. The following are the revenue limits applicable for 2018 and 2019.

Tax registration status

2018 Tax year

2019 Tax year

Single or household

$ 120,000- $ 135,000

$ 122,000- $ 137,000

Submission

$ 189,000- $ 199,000

$ 193,000- $ 203,000

Gift Submission Separately

$ 0- $ 10,000

$ 0- $ 10,000

Data Source: IRS. Note: Those who were married, filed separately, and not living with their spouse during the year, can use the individual income limits.

4. Revenue Limits for Deduction of Traditional IRA Contributions

You can always make a full contribution to a traditional IRA, but in some cases, some or all of your contributions will not be deductible. As long as you do not have a 401 (k) or other pension plan at work, you can always deduct what you contribute. However, if you or your spouse have access to a 401 (k), the deductible amounts can be reduced or eliminated altogether. The following are the income limits for those who have 401 (k) coverage on their own.

Tax registration status

2018 Tax year

2019 Tax year

Individual or household head

$ 63,000- $ 73,000

$ 64,000- $ 74,000

Married filing

$ 101,000- $ 121,000 19659031] $ 103,000- $ 123,000

Gift Submission Separately

$ 0- $ 10,000

$ 0- $ 10,000

Data Source: IRS. Note: Those who were married, filed separately, and not living with their spouse during the year, can use the individual income limits.

Meanwhile, if your spouse has 401 (k) coverage, but you don't, then full deductions are available to those with income up to $ 189,000 in 2018 or $ 193,000 in 2019. Phase-outs occur between $ 189,000 and $ 199,000 in 2017 and between $ 193,000 and $ 203,000 in 2018.

5. The deadline for contributions for the 2018 tax year is 15 April.

You always have the deadline for filing your tax return to make your IRA contribution for a given year. That means you still have until April 15 to contribute to the tax year 2018, and you can also make your contribution in 2019 anytime this year or early 2020.

Be smart with IRAs

No matter what type you choose , using an IRA is a great way to increase your retirement age. But do not wait long, because with just over a month left to make 2018 tax year contributions, you will not waste the opportunity to get started as soon as possible.


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