Broker Check

Retirement Planning

Traditional IRAs

  • Maximum $5,500 (under age 50) for 2018
  • Maximum $6,500 (age 50 or older) for 2018
  • Contributions made prior to April 15 of the current year qualify as a prior year contribution 
  • Contributions are tax-deductible 
  • Account growth is tax-deferred 
  • If you are covered by a retirement plan at work, then your tax-deductible contribution to a Traditional IRA is phased-out if:
    1. Your filing status is married filing jointly, and your AGI is more than $101,000 but less than $121,000.
    2. Your filing status is single or head of household, and your AGI is more than $63,000 but less than $73,000.
    3. If your filing status is married filing separate returns, then your deductible phase-out starts at $10,000.
  • Distributions prior to age 59 1/2 may be subject to a federal penalty of 10%

Roth IRAs

  • Maximum $5,500 (under age 50) for 2018
  • Maximum $6,500 (age 50 or older) for 2018
  • Contributions made prior to April 15 of the current year qualify as a prior year contribution
  • Contributions are not tax deductible
  • Account growth is income tax-free
  • Phase-out (Adjusted Gross Income - AGI) for 2018
    • Single Taxpayer $120,000 - $135,000 
    • Married Taxpayer $189,000 - $199,000

Annual Contribution Limits for Traditional and Roth IRAs

Tax Year

Individuals Under Age 50

Individuals Age 50 and Older

2016

$5,500

$6,500

2017

$5,500

$6,500

2018

$5,500

$6,500

Roth IRA Conversions

  • Individual Retirement Accounts (IRAs) may be converted into a Roth IRA without regard to your Adjusted Gross Income (AGI) beginning January 1, 2010 
  • Conversions from a Traditional IRA into a Roth IRA will incur income taxes 
     

Roth IRA Distribution Rules

Roth IRAs must held for at least five years and owner must be 59 1/2 or older.  Distributions used for the following purposes are not subject to penalties:

  • First Time Home Purchase (up to $10,000) 
  • Disability 
  • Death 
  • Medical Expenses 
  • Retirement

SEP IRAs (Simplified Employee Pension)

  • Available to independent contractors (you receive 1099s instead of W-2s)
    Contractor may contribute up to the greater of 25% of net income from self-employment $54,000 for 2017 and $55,000 for 2018
  • Contributions are tax-deductible 
  • Account growth is tax-deferred  
  • Distributions prior to age 59 1/2 may be subject to penalties

Individual 401(k) Plan

  • Higher potential contribution limit than SEP IRA and profit-sharing plans
  • Ability to make profit-sharing contributions and salary deferrals
  • Tax-deductible contributions and tax-deferred earnings
  • Flexible annual contributions

Group 401(k) Plans

  • Maximum contribution of 100% of gross earnings up to $18,500 for 2018 
  • Contributions are made on a pre-tax basis 
  • Account growth is tax-deferred 
  • Distributions prior to age 59 1/2 may be subject to penalties
* Please talk to your tax advisor about your situation prior to executing any strategy.