IRA Articles

January 2013 IRA Positioning – Where To Invest In 2013

As of December 31, 2012, we received an announcement from President Barack Obama that Congress is close to reaching a deal on the fiscal cliff. Markets have been quite volatile in December awaiting news on whether a deal regarding tax rates and government spending would be reached.  The Dow started December around 13,000, rose to 13,300, and fell back to 13,000 based on how the fiscal cliff negotiations were going. The basic framework of the fiscal cliff negotiations is that the top tax rate will rise from 35% to 39.6% for individuals earning $400,000 or families earning $450,000. Taxes on dividends will remain at 15% for those under that threshold but will rise to 20% for those over that threshold.

Now that we have some clarity regarding where taxes on incomes and dividends will be, I’ve been thinking about my IRA positioning for 2013. Should I invest in equities, bonds, gold, REITS, housing stocks, foreign stocks, or technology stocks?… Read More »

How To Use An IRA For a Home Down Payment

So you are looking to purchase your first home, but are concerned that you don’t have enough money saved up to come up with the down payment on your home. Fortunately, you have been diligently making contributions to your individual retirement account (IRA) over the years and have built up substantial savings in your IRA. You’re left wondering if and how you can withdraw money from your IRA to help you come up with the down payment for your first home and do it without incurring any penalties or taxes.

How Much You Can Withdraw From an IRA

Before getting too excited about using the funds in an IRA to use as a down payment on a home, we first have to discuss the limit on how much can be withdrawn. Only a maximum of $10,000 can be withdrawn from an IRA to use as a down payment on the home.… Read More »

2013 IRA Contribution Limit Announced

In 2013, the IRA contribution limit increased from $5,000 to $5,500. This is the first contribution limit increase since 2008. For the years 2008 through 2012, IRA contributions were capped at $5,000.

IRA contribution limits increase in increments of $500 and reviewed on an annual basis. The new $5,500 contribution limited applies to both Traditional IRAs and Roth IRAs. An individuals contributions to both types of IRAs cannot contribute the $5,500 sum however.  For example, if $3,000 is contributed to a Roth IRA, an individual’s contribution to a Traditional IRA would be capped at $5,500.

It’s still unknown what the 2014 contribution limit will be. Contribution limits tend to increase approximately every four years, so we may not see the IRA contribution limit increase to $6,000 until 2016. Only time will tell.

To read more about the IRA contribution limit announcement and other provision such as the limit for 401(k), please see IR-2012-77.… Read More »

Tax Ramifications of IRA Withdrawal For Home Purchase

If you’re a first-time home buyer and looking for ways to come up with a down payment on your home, you may be wondering if you can withdraw money from your retirement investments such as an individual retirement account (IRA) without incurring any penalties.

Typically, when you take money out of an IRA before you reach age 59 1/2, the Internal Revenue Service considers these premature distributions. In addition to owing any tax that might be due on the money, you may face a 10% penalty on the amount withdrawn. However, there are some exceptions to the general rule.

The IRS allows an exception for first-time home buyers. First-time home buyers are permitted to make early withdrawals from their IRA without incurring a penalty. However, there are limitations on the amount that can be withdrawn. Individuals are capped at a $10,000 withdrawal from their IRA to use towards a first-time home purchase.… Read More »

Traditional IRA vs. Roth IRA – Understanding the Basic Differences

The two most important types of Individual Retirement Arrangement (“IRAs”) are Traditional IRAs and Roth IRAs. When you are deciding between a Traditional IRA and a Roth IRA, you will want to consider several material factors including, but not limited to, Taxes, Age, Income, Contribution Limits, Contribution Deadlines, Withdrawal Scenarios, and Required Distributions.  Let’s take a quick look at the differences between a Traditional IRA and a Roth IRA in these areas to help you determine which type of IRA may be best for you!

With a Traditional IRA, you make contributions from your income, but BEFORE it is taxed.  Taxes with a Traditional IRA are levied when you take money out of the account (upon distribution). You can only contribute to a Traditional IRA until you are 70 1/2 years old, and the maximum contributions are the same as the Roth IRA. With the Traditional IRA, distributions MUST occur when you turn 70 1/2, at least for a minimum amount.… Read More »