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 IRA 
IRA

An IRA is an INDIVIDUAL RETIREMENT ACCOUNT. An IRA is a personal savings plan that provides income tax advantages to individuals saving money for retirement purposes.

How does an IRA work?

You invest money in an IRA, up to the amounts allowable under the tax law. These investments are termed "contributions." In many instances an income tax deduction is available for the tax year for which the funds are contributed. The contributions, as well as the earnings and gains from these contributions, accumulate tax-free until you withdraw the money from the account. You therefore enjoy the ability to generate additional earnings, unreduced by taxes on these earnings, each year the funds remain within the IRA.

The withdrawals of the funds from the IRA are termed "distributions." Distributions are subject to income taxation, generally in the year in which you receive them. (Remember that in most cases you received an income tax deduction when you contributed the money to the IRA.) As with most things involving the government, the rules for distributions are more complicated than they need to be.

Different types of IRA’s

  1. TRADITIONAL IRA: depending on your filing status (Single, Joint, etc), and your Adjusted Gross Income, your contributions may range from fully deductible to totally non-deductible.
  2. EDUCATION IRA: money grows tax-free and has preferential tax treatment upon distribution to the beneficiary who uses it for authorized education expenses.
  3. SEP IRA - Simplified Employee Pension: employer established and funded Simplified IRA.
  4. SIMPLE IRA: includes the ability for the employer to establish and fund a retirement plan for the benefit of him/herself and his/her employees, and permits employees to contribute specific amount into an IRA.
  5. ROTH IRA: Contributions are NOT deductible when the funds are contributed, but the Roth IRA earnings accumulate tax-free and remain tax-free upon distribution.

Eligibility:

Any individual can open and make contributions to a traditional IRA, as long as you, or your spouse (if you file a joint return), received taxable earned compensation during the year and you were not 70 ½ years old by the end of the year.

Tax-deductible Contribution

A portion of your IRA contribution may be tax deductible. This does not apply to Roth IRAs; they have different rules. But, for a Traditional IRA, it depends mostly on the amount of taxable compensation you earned in that tax year and whether or not you, or your spouse if married, are an active participant in a qualified plan. Assuming you, or you and your spouse jointly, earned more in taxable compensation than the maximum deductible amount for your IRA contributions, and neither of you are active participants in a qualified plan, you should be eligible to deduct the full amount of your contribution up to the maximum deductible amount.

If you or your spouse is an active participant in a qualified or employer-sponsored plan, then the amount of your contribution that is tax-deductible can be reduced depending on your AGI (adjusted gross income).

Can I have multiple IRA accounts at different institutions?

YES.

How do I decide which IRA is right for me?

It depends on your taxable income, and your age and family status. The best way is to schedule a meeting with me, to help you determine which type of strategy will work best for you.

Please contact me for further information: Eitan Mor, 757-486-2492.

This page is for informational purpose only and should not be construed as tax advice. Please consult your tax advisor.

 

 

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Ad Mor Insurance, LLc

1161 Pond Cypress Drive

Virginia Beach, VA 23455

Telephone: 757-486-2492

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