B Bootcamp vol. 1

I.R.A.

What Is an IRA?

An individual retirement account (IRA) allows you to save money for retirement in a tax-advantaged way.

What is a Traditional IRA & a Roth IRA• In a Traditional IRA, you make contributions with

money you may be able to deduct on your tax return and any earnings can potentially grow tax-deferred until you withdraw them in retirement.

• With a Roth IRA, you make contributions with money you’ve already paid taxes on (after-tax) and your money may potentially grow tax-free, with tax-free withdrawals in retirement, provided that certain conditions are met.

Who can Open a Traditional IRA?You can open and make contributions to a traditional IRA if:• You (or, if you file a joint return, your spouse) received

taxable compensation during the year, and• You were not age 70.5 by the end of the year.You can have a traditional IRA whether or not you are covered by any other retirement plan. However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan.

Regardless of your age, you may be able to establish and make nondeductible contributions to an individual retirement plan called a Roth IRA.Your MAGI is less than:• $183,000 for married filing jointly or qualifying widow(er),• $125,000 for single, head of household, or married filing

separately and you did not live with your spouse at any time during the year, and

• $10,000 for married filing separately and you lived • with your spouse at any time during the year.

Who can Open a Roth IRA?

When can an IRA be opened?You can open an IRA at any time. However, the time for making contributions for any year is limited

How are IRAs funded?• IRA participant contributions• Spousal IRA contributions• Transfers• Rollover contributions

IRA Contribution ChartYear Max

ContributionContribution (50

or over)2013 5,500 6,500

2012 5,000 6,000

When can contributions be made?Contributions can be made to your IRA for a year at any time during THAT year or by the due date for filing your taxes for that tax year. This means….For 2012:January 1st, 2012 all the way through Tax Filing Day in 2013For 2013:January 1st, 2013 all the way through Tax Filing day in 2014

Myths• If you make too much, you can NOT have a Roth IRA. In fact, you may not

be eligible to directly contribute but you may be able to do a “Roth Conversion”

• A minor cannot set up an IRA. In fact, neither the traditional nor Roth IRA has a minimum age limit. All that's needed is taxable income. Many financial organizations, however, will not establish an account for a minor without a parent's or guardian's signature.

• A spouse with no income is ineligible to contribute to an IRA. In fact, in the case of a married couple with compensation filing a joint income tax return, the couple may establish two separate IRAs.

• A husband and wife must establish the same type of IRA. In fact, a husband and wife do not have to contribute to the same type of IRA. For example, the husband may contribute to a Roth IRA and the wife may contribute to a traditional IRA, or vice versa.

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