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  • Retirement Savings Accounts

    Have you made your IRA contribution yet this year? Here are three reasons to make your contribution today:

    1. TAX DEDUCTION. Unless you or your spouse is covered by an employer plan or your adjusted gross income exceeds annual limits, you may be able to deduct Traditional IRA contributions from your taxes.* For example, if you contribute $5,000 to your IRA you could be able to decrease your taxable income by $5,000. For an investor in the 25% income tax bracket you would save $1,250 on your annual federal income taxes.
    2. CATCH UP ADJUSTMENT. If you are close to retirement and think it is too late to benefit from an IRA, take another look. Having only a few years of tax advantages can still make a difference. If you do not need to access your IRA money immediately, you may be able to let it grow for use later on. If you are age 50 or older, you can invest an additional $1,000 in 2012 as a catch-up contribution.
    3. TAX-ADVANTAGED CHOICES. In a Traditional IRA, your investments grow tax-free until you take distributions. Distributions both of principal and income are taxed when withdrawn. In a Roth IRA, contributions are not tax deductible. However when certain requirements are met, withdrawals — even before retirement — are tax-free.
    Traditional IRA
    Spousal IRA
    Nondeductible IRA
    Roth IRA
    Qualifications to make contributions
    Individual must have earned income and be under age 70½ at end of year.
    Individual must be under age 70½ at end of year. Contributions based on other spouse’s earned income.
    Individual or spouse must have earned income.
    Individual or spouse must have earned income. May be any age, including over 70½.
    Annual Contribution Limits
    $5,000 in 2011 & 2012.
    Annual total contribution limit between Roth IRA and Traditional IRA is $5,000 (2010). Additional $1,000 catch-up contributions available for individuals age 50 and over.
    $5,000 in 2011 & 2012.
    Less your spouse’s IRA contribution and less any contributions for the year to a Roth IRA. Additional $1,000 catch-up contributions available for individuals age 50 and over.
    $5,000 in 2011 & 2012.
    Additional catch-up contributions available for individuals age 50 and over.
    $5,000 in 2011 & 2012.
    Annual total contribution limit between Roth IRA and Traditional IRA is $5,000 (2010). Additional $1,000 catch-up contributions available for individuals age 50 and over.
    Deductibility of Contributions
    Above-the-line deduction. If active participant in employer retirement plan, phase-out rule applies; phase-out reduction of deduction begins and ends; Single, HOH: $56,000-$66,000. Married, filing joint: $90,000-$110,000. Married, filing single: $0-$10,000. If not covered under employer plan and spouse is covered: phase-out begins and ends, Married filing jointly: $169,000 - $179,000.
    Fully deductible for married couples with modified adjusted gross income (MAGI) of $169,000 or less for tax year 2011 and $173,000 or less for tax year 2012.
    Partially deductible for married couples with a MAGI of more than $169,000 and less than $179,000 for tax year 2011 and more than $173,000 and less than $183,000 for tax year 2012.
    Not deductible.
    Not deductible.
    Phase-outs begin and end:
    Single, HOH: $110,000 - $125,000
    Married, filing joint: $173,000 - $183,000
    Taxation of Distributions
    All distributions are taxable.
    All distributions are taxable.
    Basis distribution non-taxable, earnings portion is taxable.
    Qualified distributions are non-taxable, including earnings.
    *Roth IRA Contributions are not deductible.
    B.C. Ziegler and Company does not provide tax advice. Please consult your tax advisor.
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