Roth IRAs Favored for Annual Contributions, Neglected for Rollovers from Company Plans

Roth IRAsRoth IRAs become 20 years old in January of 2018 and now hold more than $660 billion in retirement wealth, reports the Investment Company Institute (the source of the data in this article). 

Yet while Roth IRAs have become very popular among individuals who make annual contributions to IRAs, they are near totally avoided by persons who roll over big-dollar distributions from company retirement plans into their IRAs, with these funds going overwhelmingly into Traditional IRAs.

This suggests that some people are undervaluing the benefits of making a rollover into a Roth IRA. If you are an individual with funds to roll over, it may pay to re-examine the benefits of choosing a Roth IRA to be the destination of a big-dollar rollover.

IRA Snapshots

Contributions to Roth IRAs exceeded those to Traditional IRAs by $21.9 billion to $17.5 billion in 2014, even though only about one-third of IRA owners have a Roth.  Yet Traditional IRAs now hold near $7 trillion in assets, dwarfing the total in Roths. The main reason is that rollovers of large balances from employer plans flow overwhelmingly into Traditional IRAs. Rollovers totaled $423.9 billion into Traditional IRAs versus a mere $5.7 billion into Roth IRAs in 2014 – Traditional IRAs received 98% of rollovers.

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The Second Half of the Retirement Game

Are Americans Ready?

The long second half of the retirement game

Second Half of the Retirement Game

  • 69% believe there is at least some chance that they will outlive their savings.
  • 14% think they definitely will!

How to fix this? Save as much as you can as soon as you can – and if it’s getting late in your career, take advantage of the $1,000 IRA catch-up contribution. In 2016, individuals age 50+ can contribute $6,500 to their IRA. Try to move as much money as possible to tax-free territory like Roth IRAs and leverage life insurance.

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Calculating the Pro-Rata Rule in 5 Easy Steps

What is the pro-rata rule?

Calculating the Pro-Rata Rule The pro-rata rule is the formula used to determine how much of a distribution is taxable when the account owner holds both after-tax and pre-tax dollars in their IRA(s). For the purposes of the pro-rata rule, the IRS looks at all your SEP, SIMPLE, and Traditional IRAs as if they were one. Even if you have been making after-tax contributions to a separate account for years, and there have been no earnings, you cannot isolate your after-tax amounts and must take your other IRAs into consideration.

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IRA Benefits for Married Couples

Four IRA Benefits

‘Tis the season for weddings! You’ve probably heard the saying that marriage has its Married IRA Benefitsbenefits. That’s particularly true for IRA rules. There are IRA benefits for married couples that are not options for single folks.

1. Spousal Contributions

Generally, to make an IRA contribution, you must have compensation (typically W-2 income or net earnings from self-employment). If you are single and have no compensation, you are out of luck. However, a special rule applies for those who are married. You can use your spouse’s compensation to fund an IRA contribution. This is a great benefit if you are a stay-at-home parent. If your spouse has enough compensation, you and your spouse can each fully fund an IRA for the year. If you are age 50 or over this year, you can each contribute $6,500 to your respective IRAs for 2016.

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4 Facts You Must Know about IRA Distribution Rollovers

IRA Rollover2015 IRA Distribution Being Rolled Over in 2016?

The rules for rolling over IRA distributions can be complicated. These rules can become especially challenging at the end of the calendar year. If you are taking an IRA distribution at the end of 2015 and considering a roll over that may not be completed until 2016, here are four facts you will want to know.

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October Tax Days to Remember

Important October IRA Deadlines

Halloween isn’t the only date in October to observe. Mark your calendars on October the 15th and 31st as tax and IRA days to remember to avoid implications.

Oct tax days calendarOctober 15

This is the last date for filing a personal income tax return that is on extension.

It is the last date for making most SEP IRA contributions if the employer’s tax return is on extension to the 15th. However, it is too late to make other IRA contributions even if a return is on extension.

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2015 IRA Contribution Limits & 2014 Market Recap

by Scott Smith | C&J Wealth Advisors

2015 IRA Contribution LimitsI hope everyone enjoyed the holidays and spending time with family and friends. Given the busy routine of life, I am glad the holiday season provides me with some down-time to re-focus on what is really important as we turn another page into a new year. This entry will cover contribution limits for 2015 and a 2014 performance summary.

For 2015, your total contributions to all your traditional & Roth IRA’s cannot exceed $5,500 or $6,500 if you are age 50 or older. For Traditional IRA’s, the deductibility of contributions depends upon levels of modified adjusted gross income (MAGI). For 2015, the MAGI deductibility phase out range for single filers is $61,000-$71,000 and $98,000-$118,000 for married couples filing jointly who have retirement plans at work. If you don’t have a retirement plan at work, then the deductibility phase out range for joint filers increases to $183,000-$193,000.

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