March 2015

The Individual Retirement Account (IRA) was first introduced in 1974 with the enactment of the Employee Retirement Income Security Act (ERISA). As the 2014 tax year filing deadline approaches, IRA investing strategy is front and center in the minds of Americans willing to create their own financial independence. It would be an understatement to say that the IRA has grown in complexity since its inception. Of all the many different types of IRAs, perhaps the most important one is the Roth IRA. No other account type offers tax-free gains, tax-free distributions, and tax-free transfer to heirs. Income limits do apply and for 2014 begin at $114K for single filers and $181K for married couples filing jointly. Please see your ASG advisor for alternative strategies if your income prevents you from funding a Roth IRA.

Roth IRA contribution limits remain unchanged for 2015. For wage earners under the age of 50, the limit is $5,500. For workers above the age of 50, the limit is $6,500. This annual funding limit is separate from the limits of employer-sponsored retirement plans such as the 401(k). The rule of thumb for most investors is to fund the employer sponsored plan first and at a level that allows for taking full advantage of company matching contributions. Next, fund the Roth IRA. Lastly, go back to the employer sponsored plan to make additional contributions, if possible.

A prior year IRA contribution is allowable up until the tax filing deadline in April. Your advisor at ASG stands ready to help you determine your prior year funding level and beat the deadline, in case you are underfunded. There is some sense of urgency to build a meaningful Roth IRA balance now. We hope that the tax-free benefits of Roth IRA investing withstand the test of time, but just this year, the White House proposed a plan to eliminate the tax benefits of a popular college savings plan known as the 529. (The proposal was quickly withdrawn.) What with the government planning on running deficits over the long term based on population demographics, no one knows for sure how long the mighty Roth IRA might last.

Once a Roth IRA is fully funded, it must be invested in such a way as to optimize your individual risk/return profile. The corresponding asset allocation decision is among the most important decisions investors make. Once more, your ASG advisor stands ready to analyze portfolio construction and recommend adjustments for 2015, if necessary. In the meantime, we keep a watchful eye on the economic calendar, business news, and the current events that shape the markets.

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