By Faith Investment Services
Bluffton, 419-358-4207
Many people save for retirement in a 401(k), which makes a lot of sense if it’s available where you work.  You can especially benefit if your employer matches your contributions and if you want to contribute to the higher threshold that 401(k)s allow.  (Employees could contribute up to $19,000 to their 401(k) plan for 2019 and anyone age 50 or over was eligible for an additional catch-up contribution of $6,000 in 2019.)

However, you only had until the end of 2019 to make contributions to your 401(k). This means you can no longer put money into your 2019 401(k) if you didn't max it out.

IRAs work differently. You have until the tax-filing deadline of April 15 to make contributions to the previous year's account, which means you get until April 15, 2020 to put money into your 2019 IRA.  That’s good news!

It pays to save in an IRA
The more money you put into your IRA, the more you will save on taxes if you contribute to a traditional account (as opposed to a Roth IRA).

You are allowed to contribute up to $6,000 annually to an IRA if you're under 50, or up to $7,000 if you are 50 or older. These limits apply to your 2019 IRA and the IRA you fund for 2020, since the IRS didn't adjust the maximum allowable contribution for the new year.

If you max out a traditional IRA at $6,000 for 2019 and you fall into the 24% tax bracket, you reap $1,440 in tax savings. Max out at $7,000, and you're talking about saving $1,680 (assuming that same bracket).  That is pretty significant!

Another thing to keep in mind is that while Roth IRAs don't offer an immediate tax break on contributions, they do offer a number of key benefits: tax-free growth on your investments in that account, tax-free withdrawals during retirement, and the ability to avoid required minimum distributions. As such, they're worth considering, too.

When your tax adviser is working on your 2019 taxes, ask them if it would be advantageous for you to open a traditional IRA (or fund your existing account.)  It is not too late, but it does require some paperwork in most cases.  Don’t wait until the last minute to decide!

If we can help you along the way, we would be glad to have a conversation with you:  www.myfaithinvestments.com/contact.

Advisory Services are offered through Creative Financial Designs, Inc., a Registered Investment Adviser, and Securities are offered through cfd Investments, Inc., a Registered Broker/Dealer, Member FINRA & SIPC, 2704 S. Goyer Rd., Kokomo, IN 46902. 765-453-9600. Faith Investment Services is independently owned and not controlled by the CFD Companies.