The Norman Transcript

Business

March 29, 2014

Not too late to fund IRA

NORMAN — Many people don’t realize that there’s still time to fund an IRA for last year. The deadline for contributions to IRAs is April 15, the filing deadline. For tax year 2013, you may deduct a maximum of a $5,500 contribution to a traditional IRA if you are under 50 years old; those 50 or over may deduct up to $6,500.

 Contributing to a traditional IRA can lower your tax burden for 2013 if you meet certain criteria. If you are filing single and are not currently eligible for a tax-deferred retirement plan, or are married, filing jointly and neither you nor your spouse has a retirement plan through an employer, you can take the full deduction no matter what your modified adjusted gross income.

If you have a retirement plan at work and have a MAGI of up to $59,000 for singles, or up to $95,000 for married couples filing jointly, you can still take the full deduction. If you are married and your spouse is eligible for a company retirement plan but you are not, your contribution is fully deductible as long as your combined annual income does not equal or exceed $178,000.

 For the Roth IRA, you pay the taxes now, but have the advantage of compounding interest, tax free, until retirement. You may contribute up to the $5,500/$6,500 limits stated above if you are a single filer with a MAGI of up to $112,000/year, or a married couple filing jointly with a combined MAGI of under $178,000.

 If you don’t meet those criteria, there are still good reasons to consider investing in an IRA as soon as possible: the tax-deferred interest compounding offered by the traditional IRA and the tax-free interest compounding that the Roth offers to those who meet certain conditions. And while taking money out of your IRA before you reach 59 years of age will result in a 10 percent additional tax, there are exceptions to that rule.

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