Wednesday, February 6, 2002
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Wednesday, February 6, 2002 |
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Investors should mull their choices in IRAs Today, Individual Retirement Accounts offer a number of options for saving toward retirement or a college education. According to the Georgia Society of CPAs, choosing the right one for you and your family is critical to ensuring that you have the finances for your goals. Here is an overview, presented by GSCPA, of some of the most popular types of IRAs. Anyone with earned income who is under age 70 is eligible to open an IRA. Taxpayers may make contributions until April 15, 2002, and qualified individuals contributing to traditional IRAs may claim a deduction on their 2001 returns. But the tax treatment of your IRA contribution depends on you and your spouse's eligibility to participate in an employer-sponsored plan, filing status and adjusted gross income. A partial IRA deduction will be available in 2001 to joint filers with AGIs under $63,000 and to single filers with AGIs under $43,000 who are active participants in an employer-sponsored retirement plan. If only one spouse is a participant, the IRA deduction phase-out begins at $150,000 of AGI. Earnings in a traditional IRA are not taxed until you take distributions or until you are required to start making withdrawals at age 70. Contributions to a Roth IRA are not tax-deductible, but all withdrawals of principal and interest are tax-free if you hold your account for at least five years and until you reach age 59. Among its other features, the Roth IRA has higher income limits than traditional IRAs. The Roth IRA contribution phases out at $150,000-$160,000 of AGI for joint filers and $95,000-$110,000 for singles and heads of household. With a Roth IRA, you also can continue to contribute after you are 70 and can withdraw your money at any age. The contribution limits are the same for both traditional and Roth IRAs. Under the Tax Act of 2001, the maximum contribution to an IRA, which has been set at $2,000 for the last 20 years, rises gradually from $3,000 in 2002 to $5,000 in 2008.
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