Posts Tagged ‘IRAs’

Credit for Your Retirement Savings Contributions

You may be eligible for a tax credit if you make contributions to an employer-sponsored retirement plan or an Individual Retirement Account (IRA).

A tax credit directly reduces the amount of federal income tax that you are required to pay. Example: Federal income tax liability is $600 and you’re eligible for a $200 Savers Credit. Your tax liability is decreased to $400. In this example you could receive a $200 boost in your refund or a $200 deduction in the amount you need to pay when you file your tax return.

Savers Credit Eligibility Requirements
You are eligible for the credit if you’re age 18 or older, not a full-time student, not claimed as someone’s dependent, and within the income limits.

2017 Income Limits:
-Single, married filing separately, or qualifying widow(er), with income up to $31,000.

-Head of Household with income up to $46,500.

– Married Filing Jointly, with incomes up to $62,000.

The amount of the credit is 50%, 20% or 10% of your retirement plan or IRA contributions up to $2,000 ($4,000 if married filing jointly), depending on your adjusted gross income.

Example: Married couple and they file a joint return. Their Adjusted Gross Income (AGI) in 2017 is $55,000. (AGI is less than taxable income and is on the last line of page 1 of your 1040 tax return form).  If they contribute $1,000 to an IRA, the government will give them a $100 credit.

For more information about income limits and credit amounts visit https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit

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Did you hear about the fiduciary rule & retirement plans?

A fiduciary is someone who has a legal obligation to put a client’s interest ahead of their own. A financial professional with a fiduciary obligation must recommend investment products that are in your best interest.

Some financial professionals have this legal obligation and some do not. For instance, brokers do not have fiduciary responsibility, a Registered Investment Advisor does. A broker is required to recommend products that are suitable for their clients. But they may also legally sell products with substantial fees and commissions that can conflict with a client’s best interests.

The debate as to which financial professionals should carry fiduciary responsibility has been going for years. On April 2016, the U.S. Department of Labor released a Fiduciary Final Rule that said any financial advisors who provide advice regarding retirement plans must meet the fiduciary standard. The rule was proposed for transitional roll out from April 17, 2017 to January 1, 2018. Financial industry groups and the U.S. Chamber of Commerce have filed lawsuits challenging the rule.

The take-home for investors is to understand how their advisor is compensated and any conflicts of interest. Be aware of the fees and commissions you are paying. If it is recommended that you roll money from a workplace retirement plan into an Individual Retirement Account (IRA) weigh the costs and benefits. Steer clear of an advisor who says company match for your retirement account is not as good as an IRA. Understand that fees and commissions can significantly impact investment returns.

Use the FINRA BrokerCheck to find out about a broker’s history http://brokercheck.finra.org/