Pension Account Traps and Tax Advice

We all know that retirement accounts are great things, but few people fully understand it, let alone the flexibility to use it for ourselves, and worse still to hurt it, and fall into a trap without paying attention. As far as I've lived, I've heard people around you talking about IRA and Roth IRA before, and I'm not sure I'll get one too. "They're not bay people." But specific good retirement plans where, adapted to my situation, how to use the good, perhaps many friends can not give an exact answer. To help you make fewer detours and start planning in early pension plans, I did some research and wrote this article in conjunction with the client's case in hand.

There are two common ways to reasonably avoid tax: direct tax deductions and deferred tax deductions. Direct deductions are easy to understand, but why is tax avoidance deferring tax? Sooner or later, I'm going to have to pay for it! Friends, the first thing you need to know is that the value of money is also long: today's dollar must be worth more than the dollar in the future, and the money saved by deferring tax can continue to make money. Second, based on the history of U.S. tax rates, the tax rate is gradually decreasing. Again, the older you get, the less income you have and the lower the tax rate.

The biggest advantage of the IRA and roth IRA is that the return on the money invested in it is not taxed immediately, and the product can continue to be reinvested as a principal. For an IRA, it is not taxed until the money is withdrawn; for Roth IRA, the money may not be taxed. (In general, the situation may be more complex, for example, depending on the level that is removed, so a specific analysis is needed)

Another advantage is that the IRA and Roth IRA are a good tool to leave their wealth to the next generation without paying a lot of taxes or paying it immediately (Stretch IRA/Roth IRA). My next article on this will be about that.

Today's article focuses on some details of the IRA and roth IRA and the "traps" in the process.

To be an IRA/Roth IRA contribution, you must have earned income (the rewards you get from your own work, such as the salary mentioned in the previous article, the income of the company you own and participate in, etc.). For a married couple, you have a tax plan opportunity: Since the IRA/Roth IRA is not an individual, you can have their own account for two people, up to $5,500 (2018) per person per year, and two people are $11,000. In the case of IRA contributions, this means that, in theory, you can deduct $11,000 from your tax return. If your spouse does not have a job or earned income but wants to take advantage of an IRA/Roth IRA, you can help Your Open a Spouse IRA/Roth IRA Account, and you can use your earned income to give the spouse's IRA income account so you don't waste the spouse's $5500, or you can deduct $11,000. As long as your earned income is sufficient.

IRA contributions can reduce taxes on tax forms. The amount that can be deducted depends on your modified AGI and your participation in your employer's pension plan (e.g. 401 k). If you have an employer sponsor's pension plan, when your modified AGI is more than $101,000 (2018, MFJ; After $63,000 to a single dollar, the deduction for your IRA contribution will be reduced, and when it reaches $121,000 (2018, MFJ; $73,000), it will not be at all. If you do not have the employer's sponsor's pension plan, but your spouse has, then when your modified AGI is greater than $189,000 (2018, MFJ), your IRA deduction will decrease, and when you reach $199,000 (2018, MFJ) it will not be deducted at all.

If some or even all of the contributions could not be on the tax bill at the time, don't be angry that it's not worth it, because when you meet the lag conditions and withdraw money from your IRA account, some of that money doesn't need to be taxed (need to be calculated, the formula simply adds all your IRA contributions without deduction, then divides it by the total balance of the old Ira Contribution undermines, then multiplies that percentage by the amount of your tax). 

The deadline for Roth IRAs and IRAs is the same as the personal tax date, usually 4/15. Even if your tax bill is extended, the deadline for contributions will go and roth IRA is still 4/15A person may have multiple IRA/Roth IRA accounts, but contribution and withdrawal rules and limits are taken into account for all your IRA or Roth IRA accounts.