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What You Need to Know About IRA and Roth IRA Contributions
Manage episode 408693963 series 3558878
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Although you may be familiar with some of the basics of Traditional IRA and Roth IRA retirement accounts, there are many different rules and tricky nuances that you might not know that can open the door for more wealth building opportunities, or possibly be a cause for concern.
For instance, you may think you make too much money to contribute to a Roth IRA or that you can’t because you have a 401(k) plan at work when that may not be true. Or maybe you’re contributing to one of these types of accounts and taking tax deductions when you’re not actually allowed to. Or you may be reporting contributions and withdrawals incorrectly on your tax returns.
All of these issues are crucial to understand each year when using Traditional IRA and Roth IRA retirement accounts to accumulate wealth.
More specifically, I discuss:
- Summary of the differences between a Traditional IRA and a Roth IRA
- The rules surrounding contributions to a Traditional IRA and Roth IRA including:
- How to fund them
- Annual contribution limits
- Eligibility to make contributions
- Contribution deadlines
- Defining “Earned Income” for contribution eligibility
- Contribution limitations to Roth IRAs
- Deductibility of Traditional IRA contributions and limitations
- Non-deductible IRA contributions and the “Back-Door” Roth IRA strategy
- Tax reporting implications of contributions to be mindful of
- Roth 5-Year Clock for Roth IRA contributions
Resources:
- Access Show Notes and Sign Up for the Retired·ish Newsletter HERE
- Free Retirement Jump-Start Analysis
- Ask Cameron A Question!
The key moments in this episode are:
00:00:00 - Understanding Traditional and Roth IRAs 00:01:28 - Critical Information for Retirement Planning 00:03:00 - Pre-tax and Tax-deferred Retirement Accounts 00:04:10 - Contribution Limits and Eligibility Requirements 00:06:01 - Strategies for Capitalizing on Contribution Opportunities 00:16:48 - IRA Contribution Deadlines 00:17:18 - Maximizing Contributions 00:18:25 - Income Fluctuations and Planning 00:19:44 - Pro Tips for Contributions 00:27:34 - Tax Implications and Reporting 00:32:32 - Understanding the Pro Rata Rule 00:33:36 - The Five Year Rule for Roth IRA Contributions 00:35:31 - Starting the Five-Year Clock 00:36:22 - Seeking Professional Retirement Planning Advice 00:38:18 - Risks and Considerations in Retirement Planning
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