LITTLE ROCK, Ark. (KTHV) -- A new bill could mean you need to change the way you save for retirement.
It's timely opportunity made available by the American Taxpayer Relief Act that was recently passed by Congress and signed by President Obama.
Delta Trust and Bank's Senior vice president and certified planner Chad Carlson was on "THV 11 News This Morning" to break it down.
There are two types of IRAs: (1) Traditional and (2) Roth. Both are excellent accounts to use for retirement savings because they allow you to defer paying taxes on your investments and savings. Contributions to Traditional IRAs may be deductible for tax purposes. Contributions to Roth IRAs are not.
You'll pay tax, however, on withdrawals from your Traditional IRA... while withdrawals from Roth IRAs are tax-free if you follow the rules. Determining which one is best for you depends on a number of factors including how much you earn and your longer term objectives.
Changes made by Congress in 2010 allow for conversion of Traditional IRAs to Roth IRAs. This is a topic you should discuss with your tax advisor this spring. Some of the reasons for considering a conversion include giving you better control over the taxes you'll pay during retirement as well as the possibility for a more efficient means of passing IRA assets to heirs. And, Roth IRAs do not have the RMD or Minimum Distribution requirements that Traditional IRAs have.
The recently passed tax relief act extends the tax favored treatment of direct charitable contributions made from your IRA for 2012 and 2013 for people over 70 and a half. And there are two very timely rules your viewers over 70 and a half should know about:
(1) Qualified distributions made to a charity by February 1st may be counted retroactively for 2012!
(2) if you're an IRA owner who took a distribution from your IRA in December... you may make a contribution up to that amount to a qualified charity before Feb. 1 and have this treated as a direct transfer.
For those who took a year-end RMD, this means they could satisfy the distribution requirement, avoid taxation of the distribution, and help their favorite charity.
Talk to your tax advisor or financial planner for assistance. Or call us at Delta Trust. Also remember that a planned giving officer at your favorite charity is an excellent resource as well.