How to make the most of your IRA
Don't miss out on tax advantages
Due to recent events, Tax Day has been moved. Consider whether this extra time can help you improve your tax efficiency strategy, especially when it comes to retirement.
The best way to maximize the tax benefits that come with an IRA is to contribute the maximum amount each year. And now, with tax day pushed out, you have even more time to fund your future.
A new law, the SECURE Act, has passed and may affect your future IRA contributions and withdrawals. You can contribute to your IRA longer and you don't have to withdraw your funds as early.1
The Setting Every Community Up for Retirement Enhancement (SECURE) Act is a new bipartisan bill designed to expand retirement savings. Under SECURE, the age to begin taking required minimum distributions has been increased from 70 ½ to 72 and there is no longer any age restriction on contributing to a traditional IRA. With these changes, come potential tax impacts for non-spouse beneficiaries. Speak with your financial professional and tax professionals to learn how this may affect your retirement strategy.
The contribution limit for the 2019 tax year is $6,000 ($7,000 if you're 50 or older). You have until July 15, 2020, to put in as much as you can.
Benefit: If you meet the requirements to deduct your traditional IRA contribution, you could potentially lower your adjusted gross income by the amount you contribute.
Translation: More money available for your near-term goals with a traditional IRA. (One thing to note: This only applies to traditional IRAs, not Roth IRAs.)
Contribution limits are $6,000 for the 2020 tax year ($7,000 if age 50 or older). When you contribute to your IRA throughout the year, you have a greater chance of fully funding it.
Benefit: Maxing your contributions annually could help your retirement savings, thanks to the power of compounding.
Translation: The more you put in, and the earlier, the greater your growth potential.
States tax rules may differ from federal rules governing the tax treatment of Roth IRAs and there may be conflicts between federal and state tax treatment of IRA conversions. Consult your tax professional for your state's tax rules.
Withdrawals made prior to the age of 59 ½ may be subject to a 10 percent federal tax penalty.
Thrivent and its financial professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.
1 If you were 70 ½ years old in 2019, you're subject to required minimum distributions (RMDs) laws in effect before the SECURE Act.