It's not too late to make a 2014 IRA contribution!
Now that we are in calendar year 2015 you may believe that it is too late to make a 2014 contribution to their IRA account. However, keep in mind that you can make 2014 contributions into either Traditional or Roth IRAs until April 15, 2015. Given the fact that income limits affect both contribution eligibility as well as their deductibility, it is only fair that the IRS allow taxpayers time to evaluate where they stand.
The use of both Traditional and Roth IRAs enable individuals to save for retirement in a tax-advantaged way. In a Traditional IRA, individuals make contributions that may be tax deductible, and any earnings grow tax-deferred. With a Roth IRA, individuals make contributions with after-tax dollars that will grow tax-free. Withdrawals from Roth IRAs are tax-free as long as certain conditions are met.
For 2014, eligible individuals may contribute up to $5,500 into an IRA. Individuals who are 50 years old or older may contribute an additional $1,000 for a total contribution of $6,500 into their IRA account.
For couples in which neither spouse is an active participant in an employer-sponsored retirement plan, contributions are deductible without regard to the participant’s modified adjusted gross income. If both spouses are active participants in an employer-sponsored plan, then the tax deductibility of contributions are phased out for couples filing jointly with incomes between $96,000 to $116,000. While couples with incomes above this threshold will not be able to deduct the IRA contribution on their tax return, they are still eligible to make a non-deductible Traditional IRA contribution.
For 2014, only taxpayers with modified adjusted gross income below certain levels are permitted to make contributions to a Roth IRA, which is phased out for married couples with income incomes between $181,000-$191,000. There is no income limit for converting a Traditional IRA to a Roth IRA.
The benefits of utilizing IRAs to accumulate wealth for your retirement years are significant and can be a valuable complement to the contributions that you are already making to your 401(k) or 403(b).
For assistance in evaluating which type of IRA contribution would be best for you and how IRAs can play a significant role in your overall financial plan feel free to contact us.