At the beginning of each New Year, many of us pause to reflect on our lives, sometimes deciding to make positive changes which will impact our own future or the future of those we love. Common New Year’s resolutions are to eat healthier, quit smoking, or lose weight. These are admirable goals with short-term results possible and long-term benefits when the plan is successful. Some decide to do more for those less fortunate, by volunteering or donating to charitable organizations. All of these resolutions are worthwhile, positive changes to make.
Another idea that would similarly work to improve the quality of life for yourself and those you love is to invest in a retirement program. It’s never too early to start saving; the earlier a retirement plan is initiated, the more likely there will be enough income available to see you through retirement. And with the future uncertain for programs such as Social Security and Medicare, self-reliance and supplemental retirement income is always a smart choice. Those fortunate enough to work for an employer that offers retirement benefits should consider saving a higher percentage each year,as well as looking into additional ways to save for the future. For those who do not have retirement options available through their place of employment, an Individual Retirement Account, or IRA, is one way to get started with retirement planning.
The money you contribute to a traditional IRA, up to a maximum annual contribution, is not taxed in the year it is added to the IRA; it is not taxed until it is taken out during retirement. For 2013, the maximum amount that could be contributed to a traditional IRA was the smaller of $5,500, and $6,500 for individuals age 50 or older (called a "catch-up” contribution) or the individual's taxable conpensation for the year. There is another type of IRA, called a Roth IRA, which is set up with after-tax funds but then is not taxable when distributed during retirement or any time it is withdrawn. For those who are self-employed, there are additional IRA options that are designed to take the place of employee pension plans. One such option is called a SEP (simplified employee pension) IRA. Depending upon your income level, contributions to a SEP IRA can be significantly more in a calendar year than a traditional IRA, as they are based either on the compensation paid to an employee or your net profit as a self-employed business owner.
IRA’s are easy to open and fund. They are available through many financial institutions; most likely your local bank will have several different types from which to choose. Your local banking professional can help you to determine what type of IRA would offer you the optimal retirement benefit for the future, and the best tax savings for your financial situation. Some community banks, such as Texas Gulf Bank, offer complimentary consultations to help you determine the most effective retirement planning and wealth management strategies for you and your family. Of course your tax professional should be independently consulted for advice regarding your own situation. One of the most convenient features of an IRA is that it does not have to be opened or funded during the calendar year in order to provide a tax benefit for that year. To open an IRA and make a tax-deductible contribution for the 2013 tax year, for example, the IRA does not need to be opened until the tax deadline(normally April 15th).
So if leading a more responsible life in the New Year is your goal, then quit smoking, adjust your diet and exercise more. But don’t forget about future planning, tax savings and your financial health. Look into an IRA for you and your family
. And have a prosperous, Happy New Year!