Rushville Republican

Business

Discussion

Add a comment on this story
March 15, 2013

Time for Gen-Xers to Put IRAs to Work

Brian Humphrey Rushville Republican

RUSHVILLE — If you’re a “Gen-Xer,” born between 1965 and 1980, you’ve still got many years to go until you retire. At this stage of your life, what can you do to help build resources for the retirement lifestyle you’ve envisioned?

Besides having time on your side, you’ve got another key advantage in saving for retirement - specifically, you probably haven’t reached your peak earning years. This helps you in at least two ways. First, of course, it means you should be able to increase your retirement savings in the future. And second, it might mean you’re still eligible to contribute to one of the most effective retirement accounts available - the Roth IRA.

When you invest in a Roth IRA, your earnings are distributed tax free, provided you’ve had your account at least five years and you don’t start taking withdrawals until you’re at least 59½. For the 2013 tax year, you can put in up to $5,500 to a Roth IRA; when you reach 50, you’ll also be able to make “catch-up” contributions. (Currently, the catch-up limit is $1,000.)

However, the ability to make Roth IRA contributions is limited by income. For 2013, you can make the full contribution to a Roth IRA if you are single and your modified adjusted gross income (MAGI) is less than $112,000. Above this amount, your contribution limit will be gradually reduced, and if your MAGI reaches $127,000, you won’t be able to contribute at all. If you’re married filing jointly, the lower limit is $178,000 and the cutoff amount is $188,000.

Of course, if you have to consider these income limits, you’re making a reasonably good living, and you may well be on a career path that will take you to even greater earnings - which is why you should think about putting in as much as possible to a Roth IRA while you’re eligible.

If your earnings are already over the limit for the Roth IRA, you can still contribute to a traditional IRA. Your contributions can grow tax deferred, which means your money can accumulate faster than it would on an account on which you paid taxes every single year. Taxes are due upon withdrawal, and withdrawals prior to age 59½ may be subject to a 10 percent IRS penalty.

But what if your income level is such that you could contribute to either a Roth IRA or a traditional IRA? Which one should you choose?

There’s no “right” answer for everyone. On the one hand, the Roth’s tax-free distributions may be more attractive to you than the tax-deferred growth potential of a traditional IRA if you expect your tax rate to be higher in the future. However, depending on your income level and whether you have access to a 401(k) or other retirement plan at work, your traditional IRA contributions may be fully or partially tax-deductible. But these types of calculations are not easy, so before making the traditional-or-Roth choice, you’ll need to consult with your tax advisor.

In any case, now is the time to capitalize on your Gen-X status and use the years ahead to invest consistently in an IRA and other tax-advantaged retirement accounts. As an investor, time is your greatest ally - so take advantage of it.



Brian Humphrey is a financial consultant and investment advisor.

 

Text Only
Business
  • Dream Home contest winner Dream Home contest winner

    Pictured (left to right) are Michael Davis, BMO Harris Bank, winner Scott Adkins, Katie Adkins, their children, Debbie O’Neal-Leisure branch manager BMO Harris, Hubert the BMO Harris mascot, Laura Simmonds, Christine Lykins and Steve Eichler of BMO Harris.

    May 17, 2013 1 Photo

  • Wells Fargo makes lead gift to RMH Pediatrics Wells Fargo makes lead gift to RMH Pediatrics

    On behalf of Wells Fargo Bank, Bruce Everhart, Marissa Taylor, and Theresa Alexander recently presented $5,000.00 towards the Rush Memorial Hospital Foundation Kedo’s Kids Campaign to Rush Memorial Hospital President and CEO Brad Smith and RMH Foundation Executive Director Faith Mock.

    May 17, 2013 1 Photo

  • Snyder Local American Family Insurance agent Kevin L. Snyder recognized

    Kevin L. Snyder, an American Family Insurance agent in Rushville has been recognized for providing outstanding customer experience under the American Star Excellence in Customer Experience Certification. Snyder joins other American Family agents who have demonstrated the highest level of commitment to outstanding customer service.

    May 17, 2013 1 Photo

  • Should you take a pension buyout?

    Have you recently received a pension buyout offer? If so, you need to decide if you should take the buyout, which could provide you with a potentially large lump sum, or continue accepting your regular pension payments for the rest of your life. It’s a big decision.

    May 17, 2013

  • Fussner Fussner to attend Chamber Institute

    The Board of Directors of the Rush County Chamber of Commerce is pleased to announce that Sandy Fussner, executive director of the Chamber, will be attending her first year of the Institute for Organization Management at the University of Wisconsin in Madison, Wis., from June 2 to June 6 this year.

    May 14, 2013 1 Photo

  • Should you take a pension buyout?

    Have you recently received a pension buyout offer? If so, you need to decide if you should take the buyout, which could provide you with a potentially large lump sum, or continue accepting your regular pension payments for the rest of your life. It’s a big decision.

    May 13, 2013

  • Full Service Day at Admiral

    Admiral Service Station will take you back to the days when your gas was pumped and windshields cleaned for a Relay for Life fundraiser from 10 a.m. to 4 p.m. May 25 at Admiral Service Station, South Main St., Rushville.

    May 7, 2013

  • trane Trane celebrates a 100-year legacy

    Trane, a leading global provider of indoor comfort solutions and services and a brand of Ingersoll Rand, is celebrating its centennial anniversary of delivering performance, innovation, commitment and knowledge to its communities.

    May 6, 2013 1 Photo

  • Broadband Networks Wireless Internet announced as new brand name for Omnicity

    Broadband Networks has announced Broadband Networks Wireless Internet as the new brand name for the company formerly known as Omnicity, Incorporated. Broadband Networks purchased the Rushville-based, wireless broadband Internet service provider in December 2012.

    May 3, 2013

  • Job Fair to be held in Greensburg

    A major Job Fair will be held in Greensburg Thursday, April 25, 2013. This event will take place from 11 a.m. until 7 p.m. at the Greensburg City Hall Auditorium, 314 West Washington Street.

    April 20, 2013