Last-Minute Tax Savings with IRAs

Planned Giving

IRAs not only help you save for retirement, they may provide a savings at tax time.

Contributions to an individual retirement account, Traditional or Roth, are one of the easiest ways for a qualified individual to invest in a tax-favored manner. And contributions to a Traditional IRA may be made up until April 15, 2013, or your filing date, not including extensions, and still potentially provide favorable tax benefits for your 2012 taxable income.

The beginning of the year is an opportune time to consider the many options and strategies offered by IRAs.

Types of IRAs

Traditional IRA. This IRA is a tax-advantaged account that allows earnings and deductible contributions to grow tax-deferred. This means you don’t pay income taxes on the earnings and deductible contributions until you begin taking distributions—usually after you retire and when your tax bracket is probably lower.

Roth IRA. With a Roth IRA, you can accumulate earnings on a tax-deferred basis and withdraw earnings tax-free for qualified distributions. Unlike a Traditional IRA, Roth contributions are not deductible on your federal tax return.

Contribution Limits

The 2012 contribution limit to an IRA is $5,000, or $6,000 if you’re age 50 or older. Contribution limits have increased for 2013. You may now contribute up to $5,500 ($6,500 for age 50+) for both you and your spouse as long as you meet the income requirements for funding an IRA. Contributions may be made to your IRA at any time during the year or by the filing due date of your tax return for that year, not including extensions. For most people, this means that contributions for 2012 must be made by April 15, 2013.

IRA Charitable Distributions (QCD)

For those IRA owners aged 70½, all or a portion of your required minimum distribution (RMD) can be used to make charitable distributions of up to $100,000 to qualified 501(c)(3) charities, bypassing the taxation of the distribution. An endowment would also qualify to receive a charitable IRA distribution for perpetual giving to a ministry or cause of your choice.


Simplify your retirement savings. The hassle of tracking multiple 401(k)s, 403(b)s, and other IRAs can be time-consuming and costly—especially if you’re not paying attention to the fees the financial company may be charging. A great way to overcome the stress of multiple retirement accounts is to roll your funds into a single retirement account.

If you do not currently have an IRA, you still have time to open one before the end of the tax filing season to receive tax benefits. Contact an investment representative at 866.621.1783 to learn more.

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