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Retirement Savings

February 1st, 2016

If you contribute to a 401(k) type retirement account there is a limit on the amount you may add to your nest egg.  If you are not yet fifty years old you may contribute up to $18,000.  If  you have attained age fifty you may contribute up to $24,000, providing certain conditions are met.

The other type of retirement account is an IRA or Individual Retirement Account.  And yes, there are two types, Traditional and Roth

The Traditional IRA receives income that has not yet been taxed from the individual.  Taxpayers under fifty years old may contribute $5,500 for 2015 and for those of us over fifty years old, we may contribute up to $6,500, providing certain conditions are met.  The IRS has placed a phaseout of these allowed deductions that is based upon your Adjusted Gross Income (AGI).

For Single or Married filing Separately taxpayers the phaseout starts at an AGI of $61,000 and the allowed contribution falls to zero when AGI is $71,000 or greater.

For those Married filing Jointly the phaseout begins at $98,000 and then at $118,000 the allowed contribution is zero.

The Roth IRA receives income that has already been taxed and when taken out after reaching age 59½ there is no tax to pay!  The IRS has placed a phaseout of these allowed deductions that is based upon your Modified Adjusted Gross Income (MAGI).

For Single  taxpayers the phaseout starts at an AGI of $116,000 and the allowed contribution falls to zero when AGI is $131,000 or greater.

For those Married filing Jointly the phaseout begins at $183,000 and then at $193,000 the allowed contribution is zero.

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