Recent market volatility, along with the pullback, creates a buying opportunity for investments. You have until April 15, 2020 to make your 2019 IRA or Roth IRA contributions. Full contributions for 2019 are $6,000, with a $1,000/year catch up amount for those over age 50. Making the total max contribution for $7,000 for people over age 50. Contributions grow tax deferred, but you can't withdraw the funds without penalty until age 59 1/2. At which time income tax is paid when funds are withdrawn from IRAs and Roth IRAs withdrawals are tax free.
Traditional IRA contributions may be tax deductible, which can help lower your 2019 tax bill. To qualify for the full annual IRA deduction in 2019, you must either not be eligible to participate in an employer sponsored plan or if you are eligible, your adjusted gross income of $65,000 or less for singles, or $104,000 or less for married couples filing jointly.
Why contribute to a Roth IRA instead of a traditional IRA? While contributions are not tax deducible, withdrawals are tax-free in retirement. Withdrawals from a traditional IRA are fully income taxable in retirement. There are income limits for being eligible for contribution to Roth IRAs. To make the full contribution to a Roth IRA, you must earn $124,000 or less per year for singles or $196,000 married filing jointly. After these income levels the contribution amount decreases.
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Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.