9 Reasons why you should OPEN an IRA by April 15, 2024
9 Reasons Why You Should Open an IRA Account for yourself by April 15, 2024
In today’s financial landscape, preparing for the future is more important than ever. An Individual Retirement Account (IRA) stands out as one of the most effective tools to secure a comfortable retirement. With the deadline for 2023 contributions looming on April 15, 2024, now is the perfect time to act. Here are nine compelling reasons why you should seriously consider opening an IRA for yourself.
1. Understanding Age Rules
For those interested in a traditional IRA, be aware that there’s an age rule. You must be under age 73 by the end of 2023 to make a contribution. However, if a Roth IRA piques your interest, there’s good news: there’s no age limit! This flexibility offers more people the chance to benefit from these accounts.
2. Delving into Compensation Rules
Having taxable wages is essential if you’re considering contributing to an IRA. This includes income from various sources like wages, salaries, net self-employment income, tips, commissions, bonuses, and even alimony. And if you’re married and file a joint tax return, only one of you needs to meet this compensation criterion in most instances.
3. Picking the Right Time to Contribute
Time is of the essence. To make your contribution count for 2023, it must be done by April 15, 2024. Remember, extensions don’t apply here. If you’re contributing between January 1 and April 15, kindly inform your plan sponsor to count it for the 2023 fiscal year.
4. Recognizing Contribution Limits
For 2023, the limit is set at $6,500 if you’re under 50. But if you’re over 50 by the end of 2023, you can make an additional $1,000 catch-up contribution, bringing the total to $7,500. Be vigilant about this, as overshooting the limit could result in a 6% penalty on the surplus.
5. Navigating Taxability Rules
The beauty of a traditional IRA lies in its tax structure. Generally, taxpayers don’t owe income tax on funds until they start making withdrawals. On the other hand, qualified distributions from a Roth IRA are delightfully tax-free.
6. Exploring Deductibility Rules
Another attractive feature of the traditional IRA is its deductibility. In many cases, taxpayers can deduct part or all of their contributions, further enhancing its appeal.
7. Leveraging the Saver’s Credit
By contributing to an IRA, you might also become eligible for the Saver’s Credit. It’s a potential boon, reducing your taxes up to $2,000 if filing a joint return. It’s crucial to ensure your tax advisor is aware of this advantage.
8. Making the Most of Retirement Plan Transfers
Transferring or rolling over a retirement plan distribution often means you won’t be taxed until you withdraw from the new plan. Without a rollover, the distribution may be taxable, except in cases of qualified Roth distributions and already taxed amounts. Remember, unless you qualify for certain exceptions, there might be an additional 10% tax on early distributions.
9. Adopting a Rich Mindset: Prioritizing Savings
Embrace the mindset of the wealthy: prioritize savings before expenses. Imagine if you could make a small shift and purchase what you want for $90 instead of $100. It’s about saving first—like setting aside 10% before handling other expenses. This could be the foundation of your new Roth IRA.
With a contribution to an IRA, taxable income is almost dollar-for-dollar reduced, especially if you earn under $50,000. This not only can reduce your tax liability or amplify your refund but also bolster your income upon retirement.
Don’t miss out on these remarkable advantages. Open an IRA account with your bank before the crucial date of April 15. By doing so, you’ll not only secure a brighter financial future but also optimize your present financial health. If you’re in the Hollywood, FL area and need consultation or IRS representation, don’t hesitate to visit our office. Reach out at 954-399-8980 and take the first step towards financial freedom.