1. You have until each year’s tax-filing deadline to fund an IRA for the previous year
This means that you have until April 15, 2019 to contribute up to $5,500 for the 2018 tax year. Similarly, you have until April 15, 2020 to make 2019 contributions.
2. Contribution limits increased for 2019
Individuals are able to contribute up to $6,000 to their Individual Retirement Account (IRA) for the 2019 tax year – a $500 increase from 2018. Contribution limits have the potential to increase on an annual basis to keep up with inflation, however the 2019 increase is the first raise to the contribution limit since 2013.
3. Catch-up contributions are an added benefit for employees over 50
If you are over the age of 50 and you’d like to give your IRA an extra boost, you’re able to through a catch-up contribution. The catch-up contribution allows you to contribute an additional $1,000 annually to your IRA – a total of $6,500 in 2018 and $7,000 in 2019. This extra money can add up.
4. Spousal IRAs are a great way for a non-working spouse to have a retirement account
If you have a spouse who currently isn’t earning a wage, they may have the opportunity to open their own IRA as long as you have earned income. They can contribute up to the maximum annual contribution limit, and even more if they’re over age 50.
There are a few requirements to be aware of though. For starters, you must file a joint income-tax return and the working spouse must also have an earned income of at least the amount of both spouses’ IRAs.
5. SEP IRAs can be a powerful retirement solution for the self-employed
If you are self-employed, or have a consulting or freelance business on the side, you have access to a SEP IRA. The advantage of the SEP IRA is its higher contribution limits. A SEP IRA allows you to contribute the lesser of $56,000 or 25% of your net self-employment income after accounting for taxes and the income reduction from the SEP contribution itself.
6. Roth IRAs may be an option even if you earn more than the income limit
Since Roth IRAs are funded with after-tax contributions, your money grows tax-deferred, you can take a withdrawal tax-free and you are not required to withdraw the money at age 70-1/2. But you can only contribute to a Roth IRA if you’re a single tax filer in 2019 earning less than $137,000 or a joint tax filer earning less than $203,000.
If you exceed these income limits, you might still have a chance to open a Roth IRA. Current IRS regulations allow investors to convert a Traditional IRA to a Roth IRA, regardless of income level (paying taxes now). This can afford you the benefits of tax-free distributions down the road, and can even help you avoid the need to take Required Minimum Distributions when you reach age 70-1/2. To determine which type of IRA might work best for your retirement plans – a Traditional or a Roth – try using our handy IRA Selection Tool.
Contributions and tax deductibility are subject to certain age and income limits, your tax filing status and whether you (or your spouse, if applicable) are covered by an employer sponsored retirement plan. PNC Investments and its affiliates and vendors do not provide legal, tax or accounting advice.
Contact PNC, today
When it comes to investing for retirement, there’s no one-size-fits-all solution. For more information on IRAs, or to discuss your personal plans for retirement in more detail, contact PNC Investments today at 855-PNC-INVEST.