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Tom Meaglia, ChFC®

Chartered Financial Consultant

AEP®, CLU®, MSFS

Investment Advisor Representative

CA Insurance Lic. #0567507


Meaglia Financial Consulting

2105 Foothill Blvd., #B140, La Verne, CA 91750


Toll Free: 800-386-3700

Bus: 909-593-6105

Cell: 818-681-8600

Fax: 909-593-6120


Email: meaglia@earthlink.net

Website: www.meagliafinancialconsulting.com

March/April 2019

Save Taxes Now or Later

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As federal and state tax filing deadlines approach, you may naturally wonder how to minimize your taxes. Traditional and Roth IRAs are two options that may minimize your total tax bill for 2018 and beyond, and you can open one for tax year 2018 up to the tax filing deadline in 2019.


Traditional IRA
If you qualify by income, contributions* made to this IRA are tax-deferred. In 2018, contribute up to $5,500, indexed to inflation, and an extra $1,000 catch-up contribution if you are age 50 or older during any part of
2018. The $5,500 annual limit, incidentally, applies to all contributions made to all of your IRAs. In tax year 2019, you can contribute even more — up to $6,000, plus the catch-up contribution if you qualify. Whether they contribute before or after tax, everyone can take advantage of any IRA’s tax-deferred potential earnings.


The current tax reduction can be considerable if you make a deductible contribution of $6,500 to a traditional IRA and are in the 30% combined tax bracket (state and federal taxes), saving $1,950 on your 2018 taxes. These savings add up over time and can benefit you in other areas — especially if you add the savings to, say, your 401(k) plan contributions or 529 plan
college savings.


Roth IRA
In contrast, a Roth IRA does not offer a current tax deduction for contributions, so you can’t reduce your 2018 tax bill by opening one. You will, however, find a number of advantages to this type of IRA account, not the least having to do with future taxes.


Like a traditional IRA, the Roth offers tax-deferred potential growth. Unlike the traditional type, the Roth doesn’t mandate minimum distributions at age 70 1/2; you don’t even have to take a Roth distribution during your lifetime. The biggest advantage, however, is the tax-free nature of distributions if you are at least age 59 1/2 and have owned the Roth IRA five years or more.


Talk to Your Professional
Your financial professional can help you decide which type of account is right for you, but one thing is certain: Both types of IRAs offer a way to minimize taxes. It’s your choice whether to take advantage of this feature now or in retirement.


*https://www.irs.gov/newsroom/irs-announces-2018-pension-plan-limitations-401k-contribution-limitincreases-to-18500-for-2018


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