Time for ‘Gen-Xers’ to put IRAs to work - Ahwatukee Foothills News: Money

default avatar
Welcome to the site! Login or Signup below.
|
||
Logout|My Dashboard

Time for ‘Gen-Xers’ to put IRAs to work

Print
Font Size:
Default font size
Larger font size

Related Stories

Posted: Saturday, March 30, 2013 9:49 am

If you’re a “Gen-Xer,” born between 1965 and 1980, you’ve still got many years to go until you retire. At this stage of your life, what can you do to help build resources for the retirement lifestyle you’ve envisioned?

Besides having time on your side, you’ve got another key advantage in saving for retirement — specifically, you probably haven’t reached your peak earning years. This helps you in at least two ways. First, of course, it means you should be able to increase your retirement savings in the future. And second, it might mean you’re still eligible to contribute to one of the most effective retirement accounts available — the Roth IRA. When you invest in a Roth IRA, your earnings are distributed tax free, provided you’ve had your account at least five years and you don’t start taking withdrawals until you’re at least 59 1/2. For the 2013 tax year, you can put in up to $5,500 to a Roth IRA; when you reach 50, you’ll also be able to make “catch-up” contributions (currently, the catch-up limit is $1,000).

However, the ability to make Roth IRA contributions is limited by income. For 2013, you can make the full contribution to a Roth IRA if you are single and your modified adjusted gross income (MAGI) is less than $112,000. Above this amount, your contribution limit will be gradually reduced, and if your MAGI reaches $127,000, you won’t be able to contribute at all. If you’re married filing jointly, the lower limit is $178,000 and the cutoff amount is $188,000.

Of course, if you have to consider these income limits, you’re making a reasonably good living, and you may well be on a career path that will take you to even greater earnings — which is why you should think about putting in as much as possible to a Roth IRA while you’re eligible.

If your earnings are already over the limit for the Roth IRA, you can still contribute to a traditional IRA. Your contributions can grow tax deferred, which means your money can accumulate faster than it would on an account on which you paid taxes every single year. Taxes are due upon withdrawal, and withdrawals prior to age 59 1/2 may be subject to a 10 percent IRS penalty.

But what if your income level is such that you could contribute to either a Roth IRA or a traditional IRA? Which one should you choose?

There’s no “right” answer for everyone. The Roth’s tax-free distributions may be more attractive to you than the tax-deferred growth potential of a traditional IRA if you expect your tax rate to be higher in the future. However, depending on your income level and whether you have access to a 401(k) or other retirement plan at work, your traditional IRA contributions may be fully or partially tax-deductible. But these types of calculations are not easy, so before making the traditional-or-Roth choice, you’ll need to consult with your tax advisor.

In any case, now is the time to capitalize on your Gen-X status and use the years ahead to invest consistently in an IRA and other tax-advantaged retirement accounts. As an investor, time is your greatest ally — so take advantage of it.

• This article was written by Edward Jones for use by Ahwatukee Foothills Edward Jones Financial Advisor Kim DeVoss, CFP. Reach her at (480) 785-4751 or Kim.DeVoss@edwardjones.com.

More about

More about

More about

  • Discuss

Clinton Picks Virginia's Tim Kaine for VP

Democratic presidential candidate Hillary Clinton and Virginia Sen. Tim Kaine at an event in Northern Virginia last week. (Alex Wong/Getty Ima…

Published: July 27, 2016 - 7:55 pm @ http://www.rollcall.com/news/politics/kaine-profile-vp

Police investigating officer-involved shooting in Scottsdale parking lot

SCOTTSDALE, AZ - Police are investigating an officer-involved shooting in a Scottsdale parking lot. The incident was reported Wednesday aftern…

Published: July 27, 2016 - 6:55 pm @ http://www.abc15.com/news/region-northeast-valley/…

Police search for answers in Phoenix murder

"Best guy you would meet, he would help anyone out, didn't matter who you were because that's just the type of guy he was," said Leon Hill. Th…

Published: July 27, 2016 - 6:49 pm @ http://www.fox10phoenix.com/news/arizona-news/1823…

Anita and Sam Means on the One Thing Phoenix's Creative Scene Needs

Becky Bartkowski A A Every other year, New Times puts the spotlight on Phoenix's creative forces — painters, dancers, designers, and actors. L…

Published: July 27, 2016 - 6:51 pm @ http://www.phoenixnewtimes.com/arts/anita-and-sam-…

Gabby Giffords delivers moving endorsement of Hillary Clinton: “Speaking is difficult for me, but in 2017, I will be able to say ‘Madame President'”

Topics: DNC 16, Elections 2016, Gabby Giffords, Gun Control, Elections News, News, Politics News Former Arizona Representative Gabriel Gifford…

Published: July 27, 2016 - 6:49 pm @ http://www.salon.com/2016/07/28/gabby_giffords_del…

Gabrielle Giffords-Before Tucson Massacre.

Find out why Loading... Loading... Rating is available when the video has been rented. This feature is not available right now. Please try aga…

Published: July 27, 2016 - 6:25 pm @ https://www.youtube.com/watch?v=QhfzxaJd1Xo

Activists protest no charges for Arizona officer in shooting

PHOENIX (AP) — A small group in Arizona on Monday protested a decision not to charge a police officer in the shooting death of a woman accused…

Published: July 27, 2016 - 5:55 pm @ http://www.ctpost.com/news/crime/article/Some-prot…

WATCH LIVE: DNC day 3 stream, schedule featuring Obama, Biden

Day three of the 2016 Democratic National Convention kicks off Wednesday in Philadelphia. This year, viewers can watch the event unabridged, a…

Published: July 27, 2016 - 5:50 pm @ http://www.nydailynews.com/news/election/watch-liv…

Music festival boom and bust: Lollapalooza, Coachella and Desert Trip boast big sales, but some fests are suffering

Topics: Bonnaroo, coachella, Festivals, lollapalooza, Music This weekend in Chicago, Lollapalooza is celebrating 25 years in existence with a …

Published: July 27, 2016 - 5:49 pm @ http://www.salon.com/2016/07/27/music_festival_boo…

Iraqi Province to Demolish Homes of Convicted Terrorists

Print With Lamborghinis and Rooftop Sushi, Why Is Kurdistan Broke? Iraq Bomb Blast Kills 11 Iraq Finally Bans Fake Bomb Detectors After July 3…

Published: July 27, 2016 - 5:51 pm @ http://www.voanews.com/content/iraqi-province-demo…

Facebook

ahwatukee.com on Facebook

Twitter

ahwatukee.com on Twitter

RSS

Subscribe to ahwatukee.com via RSS

RSS Feeds

Spacer4px

Most Popular

Online poll

Loading…