Capitalize on your Opportunities to Save with a Deductible Traditional IRA


In today’s economic environment, finding efficient ways to save for retirement is becoming increasingly important. Making the most of your hard-earned income was made easier with the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”). With increased eligibility limits and higher contribution limits, these IRAs now offer more taxpayers financial advantages that can help them maximize their retirement savings, and meet more immediate needs, such as the costs of higher education.

A traditional IRA now offers eligible taxpayers the front-end advantage of tax-deductible contributions up to $5,5001 in 2013. With a traditional IRA, contributions and earnings are not taxed until they are withdrawn, and earnings accumulate tax-deferred. Because of this deferral feature, funds may accumulate more quickly than they would in a taxable account. Keep in mind, though, that withdrawals prior to age 59 1⁄2 are generally subject to a 10% penalty tax in addition to income taxes.

Did You Know About the Increased Eligibility for a Traditional IRA?
Higher income limits allow more taxpayers to qualify for tax-deductible contributions to a traditional IRA. In 2013, partial or full tax-deductibility for contributions will be available for taxpayers with adjusted gross incomes of up to $127,000 (single filers) or $188,000 (joint filers). If neither spouse is covered by an employer-sponsored plan, contributions are fully deductible regardless of income level.

Also, if the adjusted gross income of joint filers is less than $188,000, a non-working spouse can contribute and deduct (fully or partially) $5,500, or $6,500 if age 50 or older1 in 2013 annually to a traditional IRA — even if their spouse is covered by an employer’s retirement plan.

New Withdrawal Opportunities
Normally, at age 59 1⁄2, you can begin to withdraw funds from a traditional IRA, penalty-free. IRAs allow more penalty-free withdrawals before age 59 1⁄2 to help with more immediate expenses — such as the purchase of a first home ($10,000 lifetime maximum), or qualified education expenses. With this opportunity, taxpayers can use all or some of their IRA funds even before retirement. (Note: Withdrawals from deductible IRAs are taxed as ordinary income, and, if made before age 59 ½, are subject to a 10% penalty tax, unless an exception applies. Also, required minimum distributions must begin by April 1st of the year following the year you reach age 70 1⁄2.)

Is a Traditional IRA Right for You?
Depending on your specific financial circumstances and goals, a traditional deductible IRA could be a good vehicle for your retirement funding. A contribution to a deductible IRA provides an immediate tax benefit and tax-deferred growth, as well. The benefits of tax-deferred growth can make a tremendous difference in retirement accumulation. Also, if you expect your taxable income to decrease at retirement when you begin withdrawing funds, a traditional IRA may be the right choice for you, since you can deduct contributions at high tax rates and possibly take them and earnings out at lower tax rates.

To learn more about traditional IRAs and other retirement funding options that can help you fulfill your retirement goals, contact Troy Barrow, LUTCF, Financial Representative at (646) 580-5189.

1 The $5,500 amount ($6,500 for ages 50 and older) is effective through 2013, and will remain the same in 2014. Typically for years beginning after 2008, the maximum annual contribution is indexed for inflation.

Feel welcome to contact us for a complimentary review of your personal situation. AIPS does not provide legal or tax advice, please consult your tax and legal advisors regarding your individual situation.

Posted by Troy Barrow, LUTCF – Troy is an independent Agent practicing professionally for six years and is the owner of Arlington Insurance Planning Services, licensed in the States of New York and New Jersey. You may contact Troy at 646 580-5189 or


What’s more important, Time? or Timing?

Image         Why Is Time So Important When it Comes to Saving?

 A $1 million nest egg by age 65 — it’s a nice thought, but such a nest egg will not happen magically. Accumulating assets for retirement takes time and discipline. What are the keys to retirement security? First, it’s important to understand that your savings accumulation success  depends on having a firm financial foundation in place, so in addition to accumulating assets you should have plans in place to protect or replace funds due to advents of risk, like disability or even loss of life. 

Most successful retirement funds are built by making regular payments over time. Simply put, the sooner you begin to save for future financial needs, the better.

 Can You Afford Not to Save?

Time can be one of your most powerful accumulation allies. To illustrate this point, consider the following hypothetical example. Your objective is to accumulate $1 million for retirement by age 65. If you are 25, you will need to make at the beginning of each year an annual contribution of about $6,100, assuming a 6% return. That’s about $500 per month. However, if you wait until age 45, you will need to save over $25,000 a year or approximately $2,100 per month to reach your goal. (This is a hypothetical illustration and is not intended to project the future performance of any particular product.) Although this example is basic, it proves a valuable point: postponing saving until later in the game will force you to dramatically increase your saving habits. This is a difficult task, even for the most disciplined people.

 Where Do You Begin Building a Retirement Portfolio?

Pay yourself first. If you do not currently participate, the first place to begin accumulating savings for retirement is your employer-sponsored qualified retirement plan (401(k), 403(b), etc.). Utilizing your employer-sponsored qualified retirement plan presents a tremendous opportunity for you to get a jump on retirement. Some employers will match employee contributions on a dollar-for-dollar basis, while others may contribute a smaller percentage. Either way, taking advantage of the current tax deductions and the ongoing tax-deferred compounding of earnings makes smart investment sense.

 You can also invest up to $5,5001 in an IRA in 2013. If you’re 50 or older, that amount is $6,500 for 2013. If you do not currently participate in your employer’s qualified retirement plan and if you meet certain income limits, your contributions to a traditional IRA are usually fully tax deductible. This deduction will reduce your taxable income and your current income tax bill. Alternatively, the Roth IRA may be the right choice for your retirement funding. Some advantages of a Roth IRA include:

 • Tax-free accumulation and an entirely tax-free distribution, provided that five years have passed since the first year in which a contribution was made, and you are over the age of 59 ½

• Eligibility for contributions at a higher earned income level compared to traditional IRAs

• No mandatory withdrawals during your lifetime

• The ability to continue making contributions after age 70 ½ if you’re still earning income

• IRS penalty-free withdrawals in a variety of circumstances (same with traditional IRA)

• The ability to contribute to the Roth IRA even if you already participate in an employer-sponsored plan

 If you do participate in your employer’s qualified retirement plan, your deduction for your IRA contribution may be reduced or eliminated depending on your annual adjusted gross income. Even if your contributions are not deductible, you should still consider making a yearly contribution because the money earned in the account compounds tax-deferred.

Typically, withdrawals of earnings will occur in retirement, when you will probably be in a lower tax bracket. Depending on the type of IRA, withdrawals may be taxable and, if you are under age 59 ½, may be subject to a 10% tax penalty.

 How Do I Start Funding for Retirement?

Consult your advisor or if you’re in NY or NJ, find and contact us if you don’t currently have one and make the first step towards your future financial security.


Information provided has been prepared from sources and data we believe to be accurate, but we make no representation as to its accuracy or completeness. Data and information is provided for informational purposes only, and is not intended for solicitation or trading purposes. Please consult your tax and legal advisors regarding your individual situation.


Posted by Troy Barrow, LUTCF – Troy is an independent Agent practicing professionally for six years and is the owner of Arlington Insurance Planning Services, licensed in the States of New York and New Jersey. You may contact Troy at 646 580-5189 or