Clock's Ticking for Tax Savings

Looking to save more for retirement and reduce your tax bill now and in the future? Consider opening a traditional or Roth IRA.

There’s Still Time

If you qualify by income, you may open either a traditional or Roth IRA and contribute to it until April 17, 2018 for a 2017 tax break. A traditional IRA may benefit you now, since contributions may be tax-deductible if you meet income rules, and later, in the form of potential earnings that grow tax-deferred.

Eye on the Future

The Roth IRA turns its traditional cousin on its head. You contribute after-tax dollars to this retirement vehicle, but potential earnings and distributions, once you meet certain requirements, are tax-free. To open a Roth you must meet income rules.

Now or Later

Which type of IRA is right? It depends on how you look at taxes. If you qualify by income for a tax deduction, you could favor a traditional IRA. Because you can deduct contributions to this IRA from your gross income, you lower your taxable income. Or you might not want to take a chance on future tax rates and choose the tax-free distributions of a Roth IRA.

Know the Rules

In 2017, you can put up to $5,500 annually into either IRA, plus another $1,000 if you’re over age 50. The limit applies to combined contributions made to either or both types. You also can’t contribute more than your earned income, even if this is below the annual contribution limit. Early withdrawal and required minimum distribution rules* include tax penalties, so talk to a financial professional to learn more.

*Roth IRAs are not subject to required minimum distribution rules during the account owner’s life.