Maximizing your retirement benefits
under new 2004 dollar limits
In 2004, individuals saving for retirement can take advantage of increased contribution limits for various retirement plans. Now, more money can be socked away with tax advantages like tax-deferred growth and possible tax-deductibility.
IRAs
Individuals who receive compensation and who are not age 70 1/2 or older can make contributions to Individual Retirement Accounts (IRAs). Money saved in a traditional IRA is not taxed until you take it out. Contributions are tax deductible.
In 2004, the maximum amount you can contribute to an IRA is $3,000 (not including rollover contributions). Individuals age 50 or older can add $500 for a total contribution of $3,500 in 2004. These are so-called "catch-up" contributions to help older workers save for retirement. Keep in mind, your contribution may be limited if your income is higher than thresholds set by Congress and you participate in certain employer-sponsored retirement plans. Sometimes, a taxpayer can also contribute to his or her spouse's IRA.
It's not too late to make a tax-deductible contribution for 2003. Deductible contributions must be made on or before April 15, 2004.
Roth IRAs
Contributions to a Roth IRA are not deductible. However, Roth IRA assets may be free from federal income tax when the money is withdrawn from the account. As with a traditional IRA, the maximum annual contribution to a Roth IRA is $3,000 in 2004. And, like a traditional IRA, individuals who are 50 or older can make an additional $500 in "catch-up" contributions.
401(k)s
An employee can defer as much as $13,000 in 2004 (up from $12,000 in 2003) on a pre-tax basis under a 401(k) plan. Employees who are 50 years old by the end of the plan year may make additional "catch-up" payments of up to $3,000 in 2004 (an increase from $2,000 in 2003). Catch-up contributions are also pre-tax, but only can be made if the plan permits. Employers can also make 401(k) contributions for their employees' benefit. In general, an employer's matching 401(k) contributions are not subject to the same annual limit as are employee contributions.
SIMPLE 401(k) plans
Employers can establish a Savings Incentive Match Plan for Employees (SIMPLE) if 100 or fewer of its employees received at least $5,000 in compensation from the employer last year. Eligible employees can make contributions of up to $9,000 in 2004 (an increase from $8,000 in 2003) to the SIMPLE 401(k). Employees who are 50 and over can make additional catch-up contributions of $1,500 in 2004 (up from $1,000 in 2003). Employer contributions to the SIMPLE plan are not included in the annual limit.
Tax-shelter annuity arrangements - 403(b) plans
Public school systems and certain types of tax-exempt organizations may provide retirement benefits to their employees through a tax shelter annuity plan, also referred to as a 403(b) plan. In 2004, employees can contribute up to $13,000 to a 403(b) plan and the maximum catch-up contribution is $3,000. As with other retirement plans, employees who are age 50 and above can make catch-up contributions.
Please contact this office if you have any questions concerning how much, or in what combinations, you are able to save in 2004 for your retirement on a tax-favored basis.
Link/Download of the Month
Non-Cash Donation Worksheet - Our tax software has the ability to pull information from a database that determines and assigns the actual fair market value to thousands of commonly donated items, allowing you to take advantage of your legal rights and maximize your tax savings. These fair market values are gathered from tens of thousands of items that have been bought and sold across America, implementing research conducted at thrift, consignment and specialty stores in every region of the United States. This database follows IRS guidelines in determining fair-market-values, which gives you the peace-of-mind knowing that by using this service you have the most accurate values available today.
If you would like us to help you maximize the tax savings from valuing your charitable donations and insure appropriate documentation of your charitable contribution deductions, click here to download the Non-Cash Donation Worksheet. We will enter the data from this worksheet into our software database and provide you will a report containing the appropriate valuations of each item you donated.
Calculator of the Month
Retirement Planner - Do you know what it will take to create a secure retirement? Use this calculator to help you create your retirement plan. View your retirement savings balance and your withdrawals for each year until the end of your retirement. Social security is calculated on a sliding scale based on your income. Including a non-working spouse in your plan increases your social security benefits up to, but not over, the maximum.
Are your deductions
tracking national averages?
In 2001, more than 130 million people filed tax returns. Millions took itemized deductions for medical expenses, contributions to charity, state and local taxes, and interest. In addition, many others claimed "above the line" deductions for self-employed health insurance and moving expenses.
Using data just made available in the latest US Government Statistic of Income Bulletin, we have extrapolated and computed the average amount of these common deductions. You can measure your deductions against the averages to see how they compare. Click here or on the image above for the details.
|
