2013 is the year where you can save up more funds for your brighter and more prosperous future. The IRS already announced the new contribution limits for various retirement accounts such as 401(k), IRA, and Roth IRA. The best news is that there is a slight increase with new 2013 retirement account contribution limits, which means that people have the chance to save up more for their retirement. This also means that you will have the chance to fulfill your future financial goals.
For both Traditional and Roth IRA, on the other hand, a slight increase in contribution limit will help IRA owners to enjoy more tax-deferred income or tax-free distributions upon retirement. Form the previous maximum limit of $5,000 annually, IRA owners can now make a maximum contribution of $5,500 in 2013. Catch-up contribution for account holders aged 50 and above remains the same at $1,000; thus the maximum contribution for IRA owners of this age bracket is $6,500.
According to most financial experts’ retirement advice, it is important to take advantage of this increase in contribution. It is equally important, as always, to make sure that we choose the best IRA companies to invest with. You should do a lot of research to know what is the best IRA company. Most people prefer those companies which have lower rates so they can avoid paying IRA fees. This way, they can maximize their profits in the future.
Which Type of IRA to Choose?
Generally, both Traditional and Roth IRA are good — they have each their own advantages. If you are the kind of person who prefers to pay taxes when you retire and enjoy tax-deferred contributions now, then the traditional IRA is the best for you. If, on the other hand, you prefer to enjoy tax-free distributions later on when you retire, then Roth IRA is more recommended.
Since the 2013 Roth IRA limits have already increased, it means that you get the opportunity to enjoy bigger tax-free funds and better profits, provided that you know how to invest wisely, when you retire. It is very important to remember though that you have to follow certain Roth IRA rules in order for you to enjoy the benefits of tax-free withdrawals.
Why Choose Roth IRA?
For most people, they rather pay taxes upon making IRA contributions. Relatively, most of us will increase our income as we stay longer in our jobs or perhaps get promoted. This means that our taxes will also increase. When we pay our taxes upon making contributions to a Roth IRA, we won’t have to worry about paying bigger taxes later on when we need to withdraw our money. After all, even if the Roth IRA contribution limit is the same as with the Traditional IRA, Roth account owners can enjoy bigger distributions because they are free of taxes.
If you plan to make Roth contributions, you do not need to wait for the Roth IRA deadline. You can make a Roth contribution anytime before the tax filing deadline for the year. In most cases, you should make your contributions for the prior year before April 15 of the following year.