"Speak to an advisor and determine which type of IRA offers the best fit for you"
IRA accounts to meet your retirement saving needs
In planning for retirement, the IRA offers one of the few ways to invest – often with pre-tax dollars – so that any growth in the account is tax free until withdrawn. At Capitol Securities Management, our clients enjoy the convenience of investing in stocks, bonds, mutual funds, certificates of deposit (CDs) and other alternatives.
Choosing the right type of IRA
How do you decide which type of IRA is right for you? As a general rule, there is no advantage to making nondeductible contributions to a traditional IRA if you qualify to make either deductible contributions to a traditional IRA or after-tax contributions to a Roth IRA. The question is: Assuming that you qualify for both, do you contribute to a traditional IRA with deductible contributions, or to a Roth IRA? There is no easy answer. You have to analyze your situation and determine which type of IRA offers the best fit for you. You can also consult us, a tax advisor, or other professionals.
Roth IRA Advantages
With the lure of tax-free distributions, Roth IRAs have become popular retirement savings vehicles since their introduction in 1998.
Rules for funding Roth IRAs
There are three ways to fund a Roth IRA--you can contribute directly, you can convert all or part of a traditional IRA to a Roth IRA, or you can roll funds over from an eligible employer retirement plan. In general, you can contribute up to $5,000 to an IRA (traditional, Roth, or a combination of both) in 2010. If you're age 50 or older, you can contribute up to $6,000 in 2010. (Note, though, that your contributions can't exceed your earned income for the year.) Your ability to contribute directly to a Roth IRA depends, however, on your income level ("modified adjusted gross income," or MAGI).
Is a Roth conversion right for you?
The answer to this question depends on many factors, including your current and projected future income tax rates, the length of time you can leave the funds in the Roth IRA without taking withdrawals, your state's tax laws and how you'll pay the income taxes due at the time of the conversion. If you make a Roth conversion and it turns out not to be advantageous (for example, the value of your investments declines substantially), IRS rules allow you to "undo" the conversion. You generally have until your tax return due date (including extensions) to undo, or "recharacterize," your conversion. For most taxpayers, this means you have until October 15, 2011, to undo a 2010 Roth conversion. A Capitol Securities Management professional can help you decide whether a Roth conversion is right for you, and whether you should take advantage of the special deferral rule for 2010 conversions.
For details about your IRA alternatives, please contact us today at 1 (888) Oversee.
Capitol Securities and its affiliates do not provide tax or legal advice. To the extent that this material or any attachment concerns tax matters, it is for informational purposes only. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.
