Published: Tue, 02 Mar 2021 18:34:23 +0000
Market Blog Tuesday, March 2, 2021 Coming into 2021, one of our higher-conviction ideas was that we would see rising long-term interest rates in the United States; it’s one of the reasons we recommended suitable investors consider an underweight to … Continue reading →
Published: Tue, 02 Mar 2021 16:00:25 +0000
Tuesday, March 2, 2021 Top Story Yield spike spooks stock investors In this week’s Market Signals podcast and video, LPL Research discusses soaring yields last week and examines the recent record breaking earnings season, plus updates from the Federal Reserve. … Continue reading →
Published: Mon, 01 Mar 2021 17:03:21 +0000
Market Blog Monday, March 1, 2021 Index Performance View enlarged chart. US and International Equities This month provided positive results for the major market indexes. The top performer was the Russell 2000 small cap index, returning over 6% for the … Continue reading →
Published: Mon, 01 Mar 2021 16:00:10 +0000
Monday, March 1, 2021 Top Story Here Comes The Earnings Boom LPL Research reviews an incredible earnings season and speculates on a potentially strong earnings rebound for 2021 and beyond. Find out more in today’s Weekly Market Commentary, available at … Continue reading →
Published: Fri, 26 Feb 2021 21:01:32 +0000
Market Blog Friday, February 26, 2021 Index Performance View enlarged chart. US and International Equities All major market indexes ended this week lower. The MSCI EM Emerging Markets index was the worst performer, falling over 6% this week. The Dow … Continue reading →
Published: Fri, 26 Feb 2021 16:59:06 +0000
Market Blog Friday, February 26, 2021 March is right around the corner and with it is a harsh reminder of one year ago when everything stopped. As we inch closer to a lot of reminders about March 2020, here are … Continue reading →
Published: Fri, 26 Feb 2021 16:00:44 +0000
Friday, February 26, 2021 Top Story Three charts to see Today we share three charts that have our attention on the LPL Research blog. As this bull nears one year old, it is one of the strongest starts to a … Continue reading →
Published: Thu, 25 Feb 2021 16:59:25 +0000
Market Blog Thursday, February 25, 2021 With investors taking note of improving COVID-19 trends, an expanding US economy, and additional fiscal stimulus expected in the coming weeks, many are wondering if market sentiment is getting ahead of itself, and the … Continue reading →
Published: Thu, 25 Feb 2021 16:00:46 +0000
Thursday, February 25, 2021 Top Story Sentiment running hot? There’s a lot for equity investors to be optimistic about these days, and some are wondering if optimism is getting a bit ahead of itself raising the risks of a pullback. … Continue reading →
Published: Wed, 24 Feb 2021 18:02:03 +0000
Market Blog Wednesday, February 24, 2021 In our recent Market Signals video, LPL Financial Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder are joined by guest speaker Jason Hoody, Head of Investment Manager Research, to discuss investments made … Continue reading →
Published: Wed, 24 Feb 2021 16:59:01 +0000
Economic Blog Wednesday, February 24, 2020 Leading economic indicators are providing early signs that we may be exiting a recent soft patch and the economic recovery could be poised for a reacceleration. On Monday, February 22, the Conference Board released … Continue reading →
Published: Wed, 24 Feb 2021 16:00:59 +0000
Wednesday, February 24, 2021 Top Story LEI Signals Potential Reacceleration. The Conference Board released its Leading Economic Index (LEI) report for January on Monday, showing the series rose 0.5% month over month. We believe the report could represent an early … Continue reading →
Published: Tue, 23 Feb 2021 16:59:50 +0000
Market Blog Tuesday, February 23, 2021 Treasury yields started moving sharply higher this past month (remember that as yields go up, prices go down). And while the upward march began in earnest last August when the 10-Year Treasury yield bottomed … Continue reading →
Published: Tue, 23 Feb 2021 16:00:58 +0000
Tuesday, February 23, 2021 Top Story New Market Signals Podcast Chief Strategist Ryan Detrick, Equity Strategist Jeffrey Buchbinder, and guest speaker Jason Hoody, Head of Investment Manager Research discuss why sustainable investing is a major trend that isn’t going away … Continue reading →
Published: Mon, 22 Feb 2021 16:00:21 +0000
Monday, February 22, 2021 Top Story Sustainable Investing Year In Review LPL Research reviews sustainable investing & its positive environmental, social & ESG impact with financial return. Find out more in today’s Weekly Market Commentary, available at 1 p.m. ET. … Continue reading →
Published: Fri, 19 Feb 2021 20:58:16 +0000
Market Blog Friday, February 19, 2021 View enlarged chart. US and International Equities The major market indexes ended this week mixed with the Dow Jones Industrials as the only major average higher. Results were mixed outside the United States as … Continue reading →
Published: Fri, 19 Feb 2021 18:53:38 +0000
Market Blog Friday, February 19, 2021 Today marks one year since the market began to price in the effects that COVID-19 would have on the world. The old market adage “stairs up, elevator down” certainly rang true over the coming … Continue reading →
Published: Fri, 19 Feb 2021 16:00:43 +0000
Friday, February 19, 2021 Top Story What have we learned since last year’s market peak? Today marks exactly one year from the peak for the S&P 500 Index before markets began to reflect the future impact of COVID-19, triggering the … Continue reading →
Published: Thu, 18 Feb 2021 17:00:16 +0000
Economic Blog Thursday, February 18, 2021 The US economy had a tumultuous year in 2020, to say the least, and after rebounding strongly in the third quarter, the holiday surge in COVID-19 cases increased the risk that the economy may … Continue reading →
Published: Thu, 18 Feb 2021 16:06:20 +0000
Thursday, February 18, 2021 Top Story Economic data surprising to the upside globally Based on the Citi Economic Surprise Indexes, economic data over the last three months in the major developed economies has mostly exceeded expectations. The positive US reading … Continue reading →
Published: Wed, 17 Feb 2021 17:00:52 +0000
Market Blog Wednesday, February 17, 2021 “There are three kinds of lies: lies, darn lies, and statistics.” Mark Twain As Mark Twain famously said many years ago, statistics can be twisted and turned however you’d like, telling whatever story you … Continue reading →
Published: Wed, 17 Feb 2021 15:59:23 +0000
Wednesday, February 17, 2021 Top Story Retail sales rebound in January. US retail sales rose 5.3% month over month in January according to the US Census Bureau, ahead of Bloomberg consensus forecasts of 1.1%. The surge in retail sales was … Continue reading →
Published: Wed, 17 Feb 2021 06:00:23 +0000
Market Blog Wednesday, February 17, 2021 In our recent Market Signals video, LPL Financial Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder discuss some under-the-radar ideas to add income to portfolios, look at some of the factors driving … Continue reading →
Published: Tue, 16 Feb 2021 16:54:25 +0000
Market Blog Tuesday, February 16, 2020 In LPL Research’s Weekly Market Commentary this week, we looked at some stock and bond options that may be attractive income-producing ideas for suitable income-oriented investors. On the bond side, many income-oriented investors are … Continue reading →
Published: Tue, 16 Feb 2021 16:00:21 +0000
Monday, February 16, 2021 Daily Insights Global markets avoid chill of cold and ice across the United States Weather-related power outages temporarily limited US oil output, helping to push the US oil benchmark to over $60/barrel for the first time … Continue reading →
Published: Fri, 12 Feb 2021 20:59:01 +0000
Index Performance Friday, February 12, 2021 View enlarged chart. US and International Equities The major market indexes ended a second consecutive week in the green with all averages solidly higher. The Russell 2000 Small Cap Index, which has been a … Continue reading →
Published: Fri, 12 Feb 2021 17:00:29 +0000
Market Blog Friday, February 12, 2021 “One of the most helpful things that anybody can learn is to give up trying to catch the last eighth—or the first. These two are the most expensive eighths in the world.” –Jesse Livermore … Continue reading →
Published: Fri, 12 Feb 2021 16:00:01 +0000
Friday, February 12, 2021 Top Story Looking for reasons to sell? There have been countless stock market headlines over the past 10 years that may cause investors to lose track of their long-term investment goals. With the growing concern these … Continue reading →
Published: Thu, 11 Feb 2021 18:00:05 +0000
Market Blog Thursday, February 11, 2021 A plethora of economic statistics exist that judge and measure economic progress and output. Some measures are considered leading indicators in that they help predict or forecast future economic changes. In addition, some are … Continue reading →
Published: Thu, 11 Feb 2021 17:00:27 +0000
Economic Blog Thursday, February 11, 2021 The recession appears to be behind us in the United States, and the early stages of an economic expansion have been taking shape. There is a growing debate over whether an expanding economy, in … Continue reading →
Published: Thu, 11 Feb 2021 16:00:13 +0000
Thursday, February 11, 2021 Top Story New Street View video: Three Types of Lies LPL Financial Research Chief Market Strategist Ryan Detrick illustrates how you can take any data and tell any story you want, but when you want to … Continue reading →
Published: Wed, 10 Feb 2021 17:00:50 +0000
Market Blog Wednesday, February 10, 2021 “Bulls make money, bears make money, and pigs get slaughtered.” Old Wall Street saying. The Chinese New Year (often called the Lunar New Year) will kick off Friday, February 12, and with it will … Continue reading →
Published: Wed, 10 Feb 2021 16:00:33 +0000
Wednesday, February 10, 2021 Daily Insights US streak ends at 6 days US stocks opened higher after Consumer Price Index (CPI) data reveals inflationary pressures remain benign. European markets are mixed in midday trading. Asian stocks were strong overnight with … Continue reading →
Published: Tue, 09 Feb 2021 17:52:59 +0000
Economic Blog Tuesday, February 9, 2021 The 10-year breakeven inflation rate, a market-based measure of inflation expectations, hit its highest level last Friday, February 5, since 2014. Still, at 2.21% expected annual inflation over the next 10 years, it remains … Continue reading →
Published: Tue, 09 Feb 2021 16:00:01 +0000
Tuesday, February 9, 2021 Top Story LPL Research Says It’s Time for an Upgrade In this week’s Market Signals podcast and video, Ryan Detrick and Jeff Buchbinder analyze the continued resiliency of the US economy and provide strong reasons for … Continue reading →
Published: Mon, 08 Feb 2021 16:00:05 +0000
Monday, February 8, 2021 Daily Insights US stocks open modestly higher after last week’s strong rally European markets firmly higher in midday trading with the United Kingdom outperforming after lagging last week. Asian stocks mostly higher as Japan’s Nikkei 225 … Continue reading →
Published: Fri, 05 Feb 2021 21:03:11 +0000
Index Performance Friday, February 5, 2021 View enlarged chart. US and International Equities The major market indexes ended this week in the green with all averages solidly higher. The Russell 2000 Small Cap Index, which has been a bright spot … Continue reading →
Published: Fri, 05 Feb 2021 17:15:03 +0000
Economic Blog Friday, February 5, 2021 US payrolls grew month over month in January following a brief dip into negative territory in December. Peering under the hood, though, this report did little to dispel the notion that the labor market’s … Continue reading →
Published: Fri, 05 Feb 2021 16:00:32 +0000
Friday, February 5, 2021 Top Story Jobs growth slightly positive The US economy gained 49,000 jobs in January according to the US Bureau of Labor Statistics, missing Bloomberg survey estimates of a 105,000 gain, with strong negative revisions to December … Continue reading →
Published: Thu, 04 Feb 2021 17:00:49 +0000
Market Blog Thursday, February 4, 2021 Negative yielding debt has been one of the most extraordinary and peculiar consequences of global monetary policy initiatives, turning the basic premise of fixed income investing upside down. Instead of one party lending another … 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:
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