Saving for Retirement

The almost annual changes to the income tax laws have created confusion about Individual Retirement Accounts (IRAs). Because of those confusing new laws, many people have begun to ignore one of the most powerful retirement savings tools available. A no-cost, initial consultation with a CFS* Financial Advisor (Available through CUSO Financial Services, L.P. (CFS), our broker dealer) can show you why an IRA or other retirement account should be a key part of your retirement planning efforts.

Some quick facts to consider are:

• If you can afford it, contributions to both an IRA and a 401(k) plan can help you accumulate funds faster. If you can only do one, probably the 401(k) should be chosen because of possible employer matches and deductibility of contributions.
• The value of the tax deferral on earnings within a regular IRA increases the longer the funds are in the IRA.
• Non-deductible contributions to a Roth IRA should be considered carefully in lieu of deductible contributions to a regular IRA

A few years ago, a new type of IRA was created that has become an attractive alternative to the "regular IRA." This new "Roth IRA" (named after the Delaware senator) has the same $4,000 annual contribution limit for 2005-2007 ($5,000 for 2008) contributions and the same tax deferral benefits on earnings within the IRA. Similar to regular IRAs, catch-up contributions are allowed.

The biggest differences are that the contributions are not tax deductible and that distributions are not subject to income tax. The other difference is that Roth IRA contributions are not allowed if your Adjusted Gross Income exceeds certain levels. For single filers, full contributions are allowed if your AGI is less than $114,000 and no contributions are allowed if your AGI is above $110,000. For married couples filing joint returns, full contributions are allowed if your AGI is below $156,000 and no contributions are allowed if your AGI is over $166,000.

When comparing regular and Roth IRAs, the trade-off is usually whether the loss of deductibility on current contributions with a regular IRA is worth the benefit of never having to pay income tax on distributions from a Roth IRA. Roth IRAs also provide more distribution flexibility. For many, the Roth IRA can result in superior long term benefits.

There are plenty of ways to mix and match your retirement options to make the best plan for you and your family. To learn more about your retirement and investment options, call 800.637.0852 x3371 or use the online form and schedule a no-cost initial consultation with First Tech Investment Services.