You Can, but Should You? - Part 3

Over the last two weeks, we covered the basics of IRA contributions.  (Riveting material, I know.  That's why I'm keeping them short.)

Part 1  - You have until April 15th to put money into a Roth or Traditional IRA for 2017.
Part 2 - For a Traditional IRA, you can contribute money pre-tax (aka deductible) or after-tax (aka non-deductible)

Out of the three options, which should you choose?  Uncle Sam decides for you.

How much money you make determines which contributions are allowed. 

These are the limits for 2017.  (For the nerds - these are all based on your Modified Adjusted Gross Income):

MAGI Contribution Limits.png

The rule of thumb for deductible and Roth contributions is "if you can, you should".  

If you file taxes "married, filing jointly," and make under $99,000 you should probably make a deductible contribution to your Traditional IRA.

If you're "married, filing jointly" and make more than $99,000, but less than $186,000, then you should probably contribute to your Roth IRA.

Like all good rules of thumb, these are just guidelines.   You need to talk to your financial planner to determine if the rule of thumb applies to you.  Current retirement savings, future retirement savings, and future income are just a few of the things that factor in.

Now comes the tricky part - if you make over $186,000 ($118,00 single) and can't do a deductible or Roth contributions, should you make a non-deductible IRA contribution?

That brings us full circle to the original premise - you can, but should you?

We'll close the loop next week.