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Is Social Security Enough?
Many people think Social Security will take care of them in their
retirement. But Social Security was never meant to be a stand-alone
plan. It was designed to supplement a person's retirement plan,
not replace it. While it may be possible to get by on Social Security
and a part-time job, TCF may be able to show you a better way. Experts estimate
you will need 75% of your current income to maintain your lifestyle
during retirement.
Easier Than Ever Before
Thanks to the Taxpayer Relief Act, you have more options than ever
when it comes to starting an IRA.
The Tax-Free Roth IRA
With a Roth IRA, a couple earning up to $156,000 each
year or a single person earning up to $99,000 can still qualify for tax
savings. Unlike a traditional deductible IRA, you may qualify for
a Roth IRA even if you have a retirement plan at work. Best of all,
every penny of interest earned on a Roth IRA is tax-free when held
for five years and withdrawn for retirement or another qualifying
reason. Just like traditional IRAs, you can withdraw up to $10,000
for a first-time home purchase without any penalties.
Rolling Over a 401(k) or IRA
If you've recently changed jobs, moved or retired, you may be wondering
how to handle an existing IRA or 401(k) account. We can help. We're
in the IRA business.
For your assistance, TCF has created a list of frequently asked
questions listed below regarding these changes.
Contact us if you need more information.
It is also recommended that you see a tax advisor to determine
how the law affects your own tax situation.
The information below is not tax advice and is intended for
general informational purposes only. Please consult your tax advisor
to see how the law may impact your own personal situation.
- What are the maximum annual contributions
to Traditional and Roth IRAs?
The IRA annual contribution limits are as follows:
| Tax Years 2005-2007: |
$4,000 |
| Tax Years 2008 - |
$5,000 |
| After Tax Year 2008: |
Amounts will be adjusted annually for inflation in $500
increments. |
Consult your tax advisor to determine deductibility of any
contributions.
The Tax Reconciliation Act of 2001 allows IRA holders who are age 50 and older to make catch up contributions that exceed the new maximum annual contributions. Beginning in 2006, IRA account holders age 50 and older can contribute an additional $1,000.00.
- Can I make a contribution for
a given tax year as long as I do so before April 15 of the following
year?
IRA contributions can be made as late as April 15 of the following tax year.
- How are Coverdell Education Savings Accounts
affected?
Education Savings Accounts were previously known as Education
IRAs. Education Savings Accounts can be used to cover qualifying
expenses for higher education and college, and have been expanded
to cover expenses for children in kindergarten through 12th
grade.
For higher education and college, qualifying expenses include
tuition, fees, books, supplies, and equipment required for attendance.
Certain room and board expenses also qualify for students who
are attending school at least half time.
For students in kindergarten through 12th grade, qualifying
expenses include tuition, fees, tutoring, books, supplies, and
equipment in connection with enrollment or attendance at public,
private and religious schools. Expenses for certain computer
software or equipment, room and board, uniforms, transportation,
extended day programs and other services required by such schools
may also qualify.
These contributions are not deductible. However, amounts paid
out for qualifying educational expenses are not subject to federal
income tax.
- What are the contribution limits for Education
Savings Accounts?
Effective in tax year 2002, the maximum contribution in Education
Savings Accounts is $2,000 per year. The deadline for making
contributions is the tax return date of April 15, not including
tax return extensions.
- Are there any income eligibility requirements
for contributing to an Education Savings Account?
Married individuals filing jointly with an annual joint
income less than $190,000 can make the maximum $2,000 contribution
per designated beneficiary. The maximum contribution decreases
for incomes equal to or greater than $190,000, and is eliminated
for incomes above $220,000.
Single individuals with annual incomes less than $95,000 can
make the maximum $2000 contribution per designated beneficiary.
The maximum contribution decreases for single annual incomes
of $95,000 or more, and is eliminated for single individuals
with incomes greater than $110,000.
Contact us for more information.
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