2017 IRA Contribution Rules

The deadline to make IRA contributions for tax year 2017 is Tuesday, April 17. The maximum contribution is $5,500 per individual ($6,500 if age 50 or over) or 100 percent of earned income, whichever is less.

There are income limits which determine whether you can deduct your Traditional IRA contribution or if you qualify to make a Roth contribution. The following table gives the phase-out range for the most common circumstances. Keep in mind that if neither you nor your spouse participates in a work-sponsored plan, you can deduct IRA contributions regardless of your income.

Do you qualify to deduct your Traditional IRA contribution?
If your income is less than the beginning of the phase-out range, you qualify. If your income is over the phase-out range, you do not. If your income falls inside the range, you partially qualify.

Modified Adjusted Gross Income Phase-Out Range
Tax Filing Status For 2017 Contributions For 2018 Contributions
Single, participates in an employer-sponsored retirement plan: $62,000 – $72,000 $63,000 – $73,000
Married filing jointly, participates in an employer-sponsored retirement plan: $99,000 – $119,000 $101,000 – $121,000
Married filing jointly, your spouse participates in an employer-sponsored retirement plan, but you do not: $186,000 – $196,000 $189,000 – $199,000

Do you qualify to contribute to a Roth IRA?

Modified Adjusted Gross Income Phase-Out Range – Roth
Tax Filing Status For 2017 Contributions For 2018 Contributions
Single: $118,000-$133,000 $120,000-$135,000
Married, filing jointly: $186,000-$196,000 $189,000-$199,000

If your filing status differs from those listed above, please contact your advisor and he or she can help you determine whether you qualify.

Harli Palme, CFA, CFP®

 

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A Real World Retirement Story

My father was ready for retirement. We had several discussions about picking the right time. Choosing when to retire is always a big decision. Conventional wisdom suggests the longer you wait, the better. You have more time to save and eliminate debt. Your Social Security benefit could be higher. On the other hand, how many people do you know who died before they could retire? There is something to be said for “getting out of the game” and enjoying your life.

We discussed a myriad of items. In the interest of brevity, let’s talk about two of them: finding the right insurance coverage and managing your time.

Health care is a big ticket item. No matter how well we take care of ourselves, our bodies will need more attention as we get older. Finding the right coverage is vital. Individuals over age 65 have Medicare Part A. Most people obtain supplemental insurance coverage since Part A does not pay for everything. Some plans are very expensive. Some plans provide minimal coverage at a reduced cost. Penalties can be incurred if one does not sign up for Medicare when required. And, if someone retires before age 65, coverage must be found to bridge the gap between the retirement date and Medicare eligibility.

I was overwhelmed. I arranged for my parents to meet with an insurance agent who specializes in Medicare plans.

Thanks to the draft, my dad spent a few years in the Army. His service gave him a permanent distaste for peeling potatoes. More importantly, it provided him with access to health care benefits. His previous employer’s insurance plan was awful, so he used the VA coverage as a supplement for years. He said the prescription drug discounts are good.

The agent found appropriate policies for both of my parents. My father’s supplemental policy needs were reduced by the VA coverage, whereas my mother needed increased coverage. It helped to have someone with Medicare knowledge guide them through the process. I highly recommend seeking help instead of trying to research it on your own.

She could not help us with the other problem: occupying my dad’s time. He is not a “lounge around the house” kind of guy. He must stay busy. He made a plan for the first year of retirement. He wanted to remodel the kitchen – build cabinets, replace the countertop himself, install new flooring, et cetera. He planned to tackle some home improvement projects at my house (yeah!). He wanted to get a dog which would give him a buddy and an excuse to get outdoors. Then, in about a year, he hoped to get a part-time job at a nearby home improvement store. He would be perfect for the job, and the store employs a lot of older workers.

He knew he could not be happy unless he was busy doing something. When considering retirement, it is very important to think about how one will occupy time previously spent working. We all have fantasies about what we would do. When faced with the reality of filling those hours, though, it can be a daunting task.

In the end, my father did retire. I saw an immediate “lightness.” He smiles and laughs easily. Plagued with ulcers and wicked reflux most of his life, his gastro issues have greatly improved. Retirement definitely agrees with him.

Someday, you may have the same conversations with your parents. My advice is to get help from people who know more than you – financial advisors, insurance experts, estate planning attorneys – whenever you encounter unfamiliar issues.

The same advice applies if you are considering retirement. There is more to the issue than whether or not you will have enough money. My parents and I spent almost a year talking about it. Just as you took time to find the right career or the right house, care should be taken with retirement planning too.

Of course, Parsec is here to guide you. Retirement matters are too complex to tackle alone.

Cristy Freeman, AAMS®
Senior Operations Associate

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