Published: Wed, 30 Sep 2020 17:58:27 +0000
Market Blog In the recent LPL Market Signals video, LPL Financial Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder discussed recent equity weakness and why it isn’t a major warning, along with COVID-19 worries and more, including: Recent … Continue reading →
Published: Wed, 30 Sep 2020 16:32:12 +0000
The first presidential debate is now in the books, with two more (maybe) ahead and a vice presidential debate on October 7. The debate was raucus, occasionally uncouth, and more than a little surreal for viewers at home. But did … Continue reading →
Published: Wed, 30 Sep 2020 15:05:55 +0000
Daily Insights Stocks opened higher. US equities reversed earlier losses following a contentious US presidential debate Tuesday night that raised more questions of a potentially contested election. On the flipside, House Speaker Nancy Pelosi noted positive discussions with US Treasury … Continue reading →
Published: Tue, 29 Sep 2020 16:00:03 +0000
Market Blog An old Wall Street adage says bond markets are smarter than equity markets, so when stocks encounter volatility, investors often look to the bond market for clues about the potential severity of equity market weakness. The option-adjusted spread … Continue reading →
Published: Tue, 29 Sep 2020 14:58:36 +0000
Daily Insights S&P 500 Index opens near flat after gains in four out of the last five sessions. US stocks saw broad gains Monday with a cyclical tilt as value stocks, led by energy and financials, kept pace with growth; … Continue reading →
Published: Tue, 29 Sep 2020 13:58:16 +0000
Market Blog The first presidential debate is tonight, September 29, with millions of people expected to tune in to see how each candidate handles the pressure. With tensions heightened amid an election that may be much closer than the polls … Continue reading →
Published: Mon, 28 Sep 2020 14:58:36 +0000
Daily Insights Stocks moving higher. US stocks opened in the green this morning following last Friday’s rally. The S&P 500 Index was down four consecutive weeks for the first time in more than a year. It hasn’t been down five … Continue reading →
Published: Fri, 25 Sep 2020 20:02:23 +0000
Market Blog Index Performance S&P 500 Index: -0.6% Dow Jones Industrial Average: -1.8% Nasdaq Composite: 1.1% US and International Equities The S&P 500 Index moved higher three days this week, but a 2.4% loss Wednesday pushed this index to its … Continue reading →
Published: Fri, 25 Sep 2020 16:00:03 +0000
Market Blog The September weakness continued with the S&P 500 Index 9.6% off the all-time high set on September 2 (as of 9/23/20). It is important to remember that after a 60% rally in the S&P 500—and much more in … Continue reading →
Published: Fri, 25 Sep 2020 14:49:54 +0000
Daily Insights Markets pull back. US equities are giving back some ground this morning, and that may mean the first four-week losing streak for the S&P 500 Index since August 2019. Headlines are quiet today. Democrats in the US House … Continue reading →
Published: Thu, 24 Sep 2020 15:57:45 +0000
Economic Blog In recent months, we have warmed up to Europe as a destination for equity investments in global portfolios. Through July, Europe had done a relatively good job containing the first wave of COVID-19, and cases were plummeting to … Continue reading →
Published: Thu, 24 Sep 2020 15:05:00 +0000
Daily Insights Stocks attempt to regain footing after Wednesday’s losses. Stocks are little changed at the open this morning after the S&P 500 Index tumbled 2.4% Wednesday, bringing its decline since September 2 to 9.6%, due in part to the … Continue reading →
Published: Wed, 23 Sep 2020 18:15:23 +0000
Market Blog In the recent LPL Market Signals video, LPL Financial Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder celebrate the 100th episode of this client-approved podcast, along with putting the recent stock market weakness in perspective and … Continue reading →
Published: Wed, 23 Sep 2020 15:58:14 +0000
Market Blog On March 23, 2020, the S&P 500 Index closed down 2.9% for the day, bringing its total loss from its all-time high to 33.9%. The index was in the midst of its fastest bear market ever. A day … Continue reading →
Published: Wed, 23 Sep 2020 14:58:11 +0000
Daily Insights Markets rebounded Tuesday. A tumultuous September for equities caused bargain hunters to take advantage of oversold conditions Tuesday, snapping a four-day losing streak for the S&P 500 Index. House Democrats and the White House reached a tentative deal … Continue reading →
Published: Tue, 22 Sep 2020 15:59:06 +0000
Market Blog A few weeks ago we looked at how different bond sectors performed during rising rate periods during the last economic cycle (2009–2020). Today we look at falling rate periods—not the outcome we expect, but it can still be … Continue reading →
Published: Tue, 22 Sep 2020 14:58:14 +0000
Daily Insights S&P 500 extends sell-off. Despite a strong rally in the final hour of trading, the S&P 500 Index extended its recent sell-off to open the week. As of Monday’s close, the index is now a little over 8% … Continue reading →
Published: Mon, 21 Sep 2020 18:15:00 +0000
Economic Blog We check in again today on some of the real-time economic data that LPL Research is monitoring to provide timely and valuable insights into the state of the US economy. Traditional economic data is often reported too slowly … Continue reading →
Published: Mon, 21 Sep 2020 14:58:12 +0000
Daily Insights Pullback continues. Stocks opened lower this morning as the S&P 500 Index attempts to break its three-week losing streak that has left it more than 7% below its September 2 high. Political uncertainty following Justice Ruth Bader Ginsberg’s … Continue reading →
Published: Fri, 18 Sep 2020 20:14:25 +0000
Weekly Market Performance – September 18, 2020: Markets Show Resilience Market Blog Index Performance S&P 500 Index: -0.6% Dow Jones Industrial Average: 0.0% Nasdaq Composite: -0.6% US and International Equities The equity markets attempted to gain marginal ground this … Continue reading →
Published: Fri, 18 Sep 2020 15:58:50 +0000
Market Blog One of the top requests we’ve received the past few weeks is for more charts on the US elections. We shared some of our favorite in Election Charts You Need to See: Part 1 and Part 2, and … Continue reading →
Published: Fri, 18 Sep 2020 15:06:11 +0000
Daily Insights TGIF. Stocks opened flat on an extremely light news day. Investors continued to digest the Federal Reserve’s decision from Wednesday and an influx of economic data. The S&P 500 Index is trying to avoid its first three-week losing … Continue reading →
Published: Thu, 17 Sep 2020 15:59:04 +0000
Market Blog At LPL Focus 2020, LPL Financial Chief Investment Officer Burt White and Chief Market Strategist Ryan Detrick sat around the campfire to discuss 2020 so far, what could be in store for the rest of 2020, and more, … Continue reading →
Published: Thu, 17 Sep 2020 14:59:49 +0000
Daily Insights Stocks opened lower. The late-session selling after the Federal Reserve (Fed) announcement Wednesday is spilling over this morning. Markets got a dovish Fed but seemed to want more, which is dampening enthusiasm for traders. Global markets are broadly … Continue reading →
Published: Wed, 16 Sep 2020 15:58:42 +0000
Economic Blog Retail sales rose 0.6% month over month in August following July’s downwardly revised 0.9% advance, but sales fell short of Bloomberg’s consensus expectation for a 1% increase. The retail sales control group, which excludes building materials, autos, and … Continue reading →
Published: Wed, 16 Sep 2020 14:59:36 +0000
Daily Insights Markets opened higher. US equities have continued their recent strength this week on the heels of the first two-week losing streak in nearly five months. Today the big news is the Federal Reserve (Fed) meeting, as all eyes … Continue reading →
Published: Wed, 16 Sep 2020 14:21:22 +0000
Market Blog In the recent LPL Market Signals video, LPL Financial Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder discuss the recent two-week losing streak for stocks and more, including: The fastest correction ever for the Nasdaq—and why … Continue reading →
Published: Tue, 15 Sep 2020 18:29:05 +0000
Economic Blog The US Federal Reserve (Fed) and Bank of Japan (BoJ) both meet this week, while the European Central Bank (ECB) met last week. When central bankers talk— markets listen. “The global economy has been steadying faster than many … Continue reading →
Published: Tue, 15 Sep 2020 14:58:20 +0000
Daily Insights Global stocks look to rally. Most major Asian indexes were higher overnight following strong data on Chinese industrial activity and retail sales, although Japan’s Nikkei lagged. The Euro Stoxx 600 is higher at midday. The S&P 500 Index … Continue reading →
Published: Mon, 14 Sep 2020 15:58:23 +0000
Market Blog As we noted last week, the demand for election charts is off the charts (pun intended), so we are sharing some of our favorite election charts. Without further ado, here are some more election charts you need to … Continue reading →
Published: Mon, 14 Sep 2020 14:58:49 +0000
Daily Insights Stocks opened solidly higher. Stocks are getting back a chunk of last week’s losses this morning, led by technology and boosted by vaccine optimism. It’s “Merger Monday” with large deals announced in the semiconductor and biotech industries, along … Continue reading →
Published: Fri, 11 Sep 2020 19:59:38 +0000
Market Blog Index Performance S&P 500 Index:-2.4% Dow Jones Industrial Average: -1.7% Nasdaq Composite: -4.0% US and International Equities During this shortened trading week, the equity markets sold off following a strong summer advance. While continued losses in the … Continue reading →
Published: Fri, 11 Sep 2020 15:58:58 +0000
Market Blog First off, our thoughts go out to everyone who was impacted by the tragic events of September 11, 2001—19 years ago today. It is a day to reflect and remember those who were lost. One of the top … Continue reading →
Published: Fri, 11 Sep 2020 14:58:15 +0000
Daily Insights On this day we remember those whose lives were lost in the tragic events of September 11, 2001. We will never forget. Markets moving higher. US markets opened higher following Thursday’s steep sell-off. Stocks are looking to end … Continue reading →
Published: Thu, 10 Sep 2020 17:38:19 +0000
Economic Blog With everything else going on this year due to COVID-19, it’s been easy to lose track of the latest fallout of the United Kingdom’s (UK) withdrawal from the European Union (EU), also known as Brexit. The UK is … Continue reading →
Published: Thu, 10 Sep 2020 14:59:03 +0000
Daily Insights Stocks opened higher after reversing earlier losses. European markets are slightly lower in midday trading after the European Central Bank left policy unchanged. Asian markets finished mixed—China’s Shanghai Composite and Hong Kong’s Hang Seng closed lower, while Japan’s … Continue reading →
Published: Wed, 09 Sep 2020 15:58:50 +0000
Economic Blog While the direction of the 10-year Treasury yield over the last cycle was decidedly lower, as shown in LPL’s Chart of the Day, there were still six extended periods where it rose at least 0.75%, and in two … Continue reading →
Published: Wed, 09 Sep 2020 14:58:06 +0000
DAILY INSIGHTS Equity markets rebound. US stocks opened solidly higher this morning to rebound from Tuesday’s sell-off. The outsized summer advance after the best August in over 30 years, still-elevated COVID-19 infections, US-China tensions, and skepticism concerning the economic rebound … Continue reading →
Published: Tue, 08 Sep 2020 15:58:28 +0000
Economic Blog In the recent LPL Market Street View video, LPL Financial’s Chief Market Strategist Ryan Detrick discusses why the recession is likely over, making it one of the shortest recessions ever. Some reasons discussed include: Historically, new stock market … Continue reading →
Published: Tue, 08 Sep 2020 14:58:27 +0000
DAILY INSIGHTS Tech weakness weighing on US markets early. The S&P 500 Index opened lower after the long holiday weekend as concerns about valuations and a shift in sentiment continued to weigh on some tech-oriented names. Similar concerns sent most … Continue reading →
An individual retirement arrangement (IRA) is a personal savings plan that offers specific tax benefits. IRAs are one of the most powerful retirement savings tools available to you. Even if you're contributing to a 401(k) or other plan at work, you may want to consider investing in an IRA.
The two major types of IRAs are traditional IRAs and Roth IRAs. Both allow you to contribute as much as $6,000 in 2020 (unchanged from 2019), but you must have at least as much taxable compensation as the amount of your IRA contribution. If you are married filing jointly, your spouse can also contribute to an IRA, even if he or she does not have taxable compensation. The law also allows taxpayers age 50 and older to make additional "catch-up" contributions. These folks can contribute an additional $1,000 in 2020 (unchanged from 2019).
Both traditional and Roth IRAs feature tax-sheltered growth of earnings. And both give you a wide range of investment choices. However, there are important differences between these two types of IRAs. Understanding these differences is key to choosing the type of IRA that may be appropriate for you.
Note: Special rules apply to certain reservists and national guardsmen called to active duty after September 11, 2001..
Practically anyone can open and contribute to a traditional IRA. The only requirement is that you must have taxable compensation (prior to December 31, 2019, you also had to be under age 70½). You can contribute the maximum allowed each year as long as your taxable compensation for the year is at least that amount. If your taxable compensation for the year is below the maximum contribution allowed, you can contribute only up to the amount that you earned.
Your contributions to a traditional IRA may be tax deductible on your federal income tax return. This is important because tax-deductible (pre-tax) contributions lower your taxable income for the year, saving you money in taxes. If neither you nor your spouse is covered by a 401(k) or other employer-sponsored plan, you can generally deduct the full amount of your annual contribution. If one of you is covered by such a plan, your ability to deduct your contributions depends on your annual income (modified adjusted gross income, or MAGI) and your income tax filing status.
For 2020, if you are covered by a retirement plan at work and:
For 2020, if you are not covered by a retirement plan at work, but your spouse is, and you file a joint tax return, your traditional IRA contribution is fully deductible if your MAGI is $196,000 or less. Your deduction is reduced if your MAGI is more than $196,000 and less than $206,000, and you can't deduct your contribution at all if your MAGI is $206,000 or more.
What happens when you start taking money from your traditional IRA? Any portion of a distribution that represents deductible contributions is subject to income tax because those contributions were not taxed when you made them. Any portion that represents investment earnings is also subject to income tax because those earnings were not previously taxed either. Only the portion that represents nondeductible, after-tax contributions (if any) is not subject to income tax. In addition to income tax, you may have to pay a 10% early withdrawal penalty if you're under age 59½, unless you meet one of the exceptions.
If you wish to defer taxes, you can leave your 1 of the year following the year you reach age 72. That's when you have to take your first required minimum distribution from the IRA. After that, you must take a distribution by the end of every calendar year until you die or your funds are exhausted. The annual distribution amounts are based on a standard life expectancy table and your previous year-end combined account balances. You can always withdraw more than you're required to in any year. However, if you withdraw less, you'll be hit with a 50% penalty on the difference between the required minimum and the amount you actually withdrew. (Note: if you reached age 70½ in 2019, you must begin taking required minimum distributions by April 1, 2020.)
If you are covered by an employer-sponsored retirement plan and your MAGI exceeds certain
established thresholds, your deduction for your traditional IRA contribution is reduced or
eliminated as follows:
* If you're not covered by an employer plan, but your spouse is, your deduction is limited if your MAGI is $193,000 to $203,000, and eliminated if your MAGI exceeds $203,000.
Not everyone can set up a Roth IRA. Even if you can, you may not qualify to take full advantage of it. The first requirement is that you must have taxable compensation. If your taxable compensation in 2020 is at least $6,000, you may be able to contribute the full amount. But it gets more complicated. Your ability to contribute to a Roth IRA in any year depends on your MAGI and your income tax filing status.
Qualified distributions will also avoid the 10% early withdrawal penalty. This ability to withdraw your funds with no taxes or penalties is a key strength of the Roth IRA. And remember, even nonqualified distributions will be taxed (and possibly penalized) only on the investment earnings portion of the distribution, and then only to the extent that your distribution exceeds the total amount of all contributions that you have made.
Another advantage of the Roth IRA is that there are no required distributions after age 72 or at any time during your life. You can put off taking distributions until you really need the income. Or, you can leave the entire balance to your beneficiary without ever taking a single distribution.*
These income ranges (other than married filing separately) are indexed for inflation each year.
Assuming you qualify to use both, which type of IRA is best for you? Sometimes the choice is easy. The Roth IRA will probably be a more effective tool if you don't qualify for tax deductible contributions to a traditional IRA. However, if you can deduct your traditional IRA contributions, the choice is more difficult. Most professionals believe that a Roth IRA will still give you more bang for your dollars in the long run, but it depends on your personal goals and circumstances. The Roth IRA may very well make more sense if you want to minimize taxes during retirement and preserve assets for your beneficiaries. But a traditional deductible IRA may be a better tool if you want to lower your yearly tax bill while you're still working (and probably in a higher tax bracket than you'll be in after you retire). A financial professional or tax advisor can help you pick the right type of IRA for you.
Note: You can have both a traditional IRA and a Roth IRA, but your total annual contribution to all of the IRAs that you own cannot be more than $6,000 in 2020 ($7,000 if you're age 50 or older).
You can move funds from an IRA to the same type of IRA with a different institution (e.g., traditional to traditional, Roth to Roth). No taxes or penalty will be imposed if you arrange for the old IRA trustee to transfer your funds directly to the new IRA trustee. The other option is to have your funds distributed to you first and then roll them over to the new IRA trustee yourself. You'll still avoid taxes and penalty as long as you complete the rollover within 60 days from the date you receive the funds.
You may also be able to convert funds from a traditional IRA to a Roth IRA. This decision is complicated, however, so be sure to consult a tax advisor. He or she can help you weigh the benefits of shifting funds against the tax consequences and other drawbacks.
Note: The IRS has the authority to waive the 60-day rule for rollovers under certain limited circumstances, such as proven hardship.
To claim the credit, you must be at least 18 years old and not a full-time student or a dependent
on another taxpayer's return. The credit is in addition to any income tax deduction you might
qualify for with respect to your IRA contribution. The amount of the credit is 50%, 20%, or 10% of
your IRA or retirement plan contributions up to $2,000 ($4,000 if married filing jointly), depending
on your MAGI. Here are the credit rates based on 2020 MAGI limits:
Contact a VyStar Investment Services Financial Advisor today by phone (904) 908-2495 or email VISMarketing@vystarcu.org.
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