Manage tax impacts today and in retirement with IRAs

Key Points

  • Contributing to a traditional IRA could lower your tax bill this year.
  • Funding a Roth IRA can help you build tax-free income for retirement.
  • Remember to make your 2019 IRA contributions by April 15, 2020. 

Are you taking advantage of opportunities to potentially reduce your 2019 tax bill and boost your retirement savings? Traditional and Roth IRAs could help.

Traditional IRA 2019 tax benefits

Consider funding a traditional IRA if you think you will be in a lower tax bracket in retirement or if your income is too high to for a Roth IRA. Traditional IRA contributions may be fully or partially deductible, depending on your circumstances, and can grow tax-deferred.

Traditional IRA rules:

  • You or your spouse must have earned income to contribute to a traditional IRA.
  • Your maximum contribution is $6,000 if you are under age 50 or $7,000 if you are age 50 or older.
  • There are no income restrictions for contributing to a traditional IRA or converting those funds to a Roth IRA in the future.
  • Your deduction may be limited if you (or your spouse) have a retirement plan at work and your income exceeds certain levels. Check with your tax professional or visit gov for the specific requirements.
  • You can’t contribute to a traditional IRA for 2019 if you were 70 ½ or older by the end of the 2019.
  • As a result of the Setting Every Community Up for Retirement Enhancement — the SECURE Act — signed into law December 2019, the required minimum distribution (RMD) age increased to 72 from 70 ½ and applies to anyone who turns 70 ½ in 2020 or later.
  • If you have been taking an RMD prior to 2020, you must continue to do so.

Roth IRA 2019 tax benefits

Investing in a Roth IRA can help you build more tax-free income for the future. Contributions are not tax deductible, but your earnings can be withdrawn tax-free if you satisfy certain requirements.

Roth IRA rules:

  • Your maximum contribution is $6,000 if you are under age 50 or $7,000 if you are age 50 or older.
  • Your contributions might be limited based on your filing status and income — talk with your advisor to learn more.
  • You can make contributions to your Roth IRA as long as you or your spouse have earned income that qualifies, and the account is never subject to RMDs.
  • You can make withdrawals from your Roth IRA contributions at any time without penalty, but you will owe taxes and penalties on earnings you withdraw before age 59 ½, unless you qualify for an exception.

Manage taxes today and in retirement

Reach out to your Ameriprise advisor and tax professional to determine whether a traditional or Roth IRA could provide you with tax benefits and help you achieve your goals.