Published: Fri, 15 Oct 2021 20:02:04 +0000
Market Blog Friday, October 15, 2021 Index Performance View enlarged chart. U.S. and International Equities Major U.S. and International Markets Finished Higher The major equity markets finished solidly in the green this week as we head into the genesis of … Continue reading →
Published: Fri, 15 Oct 2021 15:58:12 +0000
Economic Blog Friday, October 15, 2021 The U.S. Census Bureau reported overall retail sales grew 0.7% month over month in September vs. forecasts for a 0.2% decline, while retail sales excluding autos and gas also saw solid gains, rising 0.7% … Continue reading →
Published: Fri, 15 Oct 2021 12:00:08 +0000
Market Blog Friday, October 15, 2021 LPL Research is excited to bring the second episode of our new video series: 5 Charts with LPL Research. This week, LPL Financial Chief Market Strategist Ryan Detrick, CMT and Technical Strategist Scott Brown, … Continue reading →
Published: Thu, 14 Oct 2021 18:44:59 +0000
Economic Blog Thursday, October 14, 2021 The U.S. Bureau of Labor Statistics (BLS) released its monthly Job Openings and Labor Turnover Survey (JOLTS) report this week revealing that the number of American workers who are voluntarily quitting their jobs is … Continue reading →
Published: Wed, 13 Oct 2021 15:58:09 +0000
Economic Blog Wednesday, October 13, 2021 The characterization of inflation as ”transitory” by Federal Reserve (Fed) Chair Jerome Powell—which has been the subject of debate for months—is likely to come under renewed pressure after the most recent inflation data release. … Continue reading →
Published: Tue, 12 Oct 2021 15:58:37 +0000
Market Blog Tuesday, October 12, 2021 The week of September 20 was notable for monetary policy as there were eleven central bank meetings, including the U.S., E.U., U.K., Turkey, and Norway, to name a few. While many of these countries … Continue reading →
Published: Tue, 12 Oct 2021 12:25:34 +0000
Market Blog Tuesday, October 12, 2021 LPL Research is excited to introduce a new weekly video series, 5 Charts With LPL Research. Each week, LPL Financial Chief Market Strategist Ryan Detrick, CMT and Technical Strategist Scott Brown, CMT will review … Continue reading →
Published: Mon, 11 Oct 2021 18:00:28 +0000
Market Blog Monday, October 11, 2021 Index Performance View enlarged chart. U.S. and International Equities This quarter provided mostly negative results for the major market indices. The top performer and standout was the bellwether Dow Jones Industrial Average. The international … Continue reading →
Published: Mon, 11 Oct 2021 15:58:52 +0000
Market Blog Monday, October 11, 2021 We have used most of the superlatives we know to describe corporate America’s stunning performances over the past two earnings seasons. Despite lofty expectations, results exceeded estimates by huge margins. We expect solid earnings … Continue reading →
Published: Fri, 08 Oct 2021 20:10:34 +0000
Market Blog Friday, October 8, 2021 Index Performance View enlarged chart. U.S. and International Equities Major U.S. and International Markets Finished Higher The major equity markets reversed course from last week to finish higher. The international markets results were mixed … Continue reading →
Published: Fri, 08 Oct 2021 15:58:17 +0000
Economic Blog Friday, October 8, 2021 The September payroll report likely created more questions than it answered. The U.S. Bureau of Labor Statistics released its September employment report this morning, revealing that the domestic economy added a disappointing 194,000 jobs … Continue reading →
Published: Fri, 08 Oct 2021 12:00:16 +0000
Market Blog Friday, October 8, 2021 There is no reason to panic with all the big news about the bull market—October is known for volatility. As LPL Financial Chief Market Strategist Ryan Detrick discusses in the latest LPL Street View, … Continue reading →
Published: Thu, 07 Oct 2021 16:15:27 +0000
Economic Blog Thursday, October 7, 2021 Based on recent readings of manufacturing and service sector activity, business demand remains strong, further damaging the “stagflation” narrative. At the same time, barriers to meeting demand continue to limit businesses’ ability to respond, … Continue reading →
Published: Wed, 06 Oct 2021 15:58:03 +0000
Market Blog Wednesday, October 6, 2021 And just like that, the calendar turned to October and volatility picked up in a big way, with three consecutive 1% moves for the S&P 500 Index to start the month. As we noted … Continue reading →
Published: Tue, 05 Oct 2021 15:58:44 +0000
Market Blog Tuesday, October 5, 2021 The debt limit—commonly called the debt ceiling—is the maximum amount of debt that the Treasury Department can issue to pay its, already committed, financial obligations. The amount is set through Congress and has been … Continue reading →
Published: Mon, 04 Oct 2021 16:00:51 +0000
Market Blog Monday, October 4, 2021 Index Performance View enlarged chart. U.S. and International Equities September has been the worst performing month over the past 10 and 20 years. Looking at the prior year, the S&P 500 pulled back over … Continue reading →
Published: Fri, 01 Oct 2021 20:01:49 +0000
Market Blog Friday, October 1, 2021 Index Performance View enlarged chart. U.S. and International Equities Major U.S. and International Markets Finished lower The major equity markets finished the week, along with the month of September, lower. The international markets were … Continue reading →
Published: Fri, 01 Oct 2021 15:58:17 +0000
Market Blog Friday, October 1, 2021 The latest weekly data from the American Association of Individual Investors (AAII) show a continued increase in the percentage of individual investors who are bearish (40.7%) about short-term market expectations and a decrease in … Continue reading →
Published: Thu, 30 Sep 2021 15:58:14 +0000
Market Blog Thursday, September 30, 2021 “October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” Mark Twain Well, it was bound … Continue reading →
Published: Wed, 29 Sep 2021 15:58:41 +0000
Economic Blog Wednesday, September 29, 2021 Stocks have come a long way since the S&P 500 bear market low way back on March 23, 2020, but despite the general strength of the bull market we’ve seen two very different types … Continue reading →
Published: Tue, 28 Sep 2021 15:58:10 +0000
Market Blog Tuesday, September 28, 2021 The municipal market continues to be a relative bright spot for core fixed income investors. While most of the other “safe” parts of the core fixed income universe have generated negative returns this year, … Continue reading →
Published: Fri, 24 Sep 2021 20:06:23 +0000
Market Blog Friday, September 24, 2021 Index Performance View enlarged chart. U.S. and International Equities Major U.S. Markets Finished higher while International Markets Selloff The major markets finished the week higher, with the Dow Jones Industrials leading the averages. Moreover, … Continue reading →
Published: Fri, 24 Sep 2021 15:58:04 +0000
Economic Blog Friday, September 24, 2021 On Thursday, September 23, the Conference Board released its August 2021 report detailing the latest reading for the Leading Economic Index (LEI), a composite of ten data series that tend to lead changes … Continue reading →
Published: Thu, 23 Sep 2021 15:58:34 +0000
Economic Blog Thursday, September 23, 2021 The Federal Reserve (Fed) ended its two-day Federal Open Market Committee (FOMC) meeting yesterday and, as expected, there were no changes to current interest rate or bond purchasing policies. However, the Fed continues to … Continue reading →
Published: Wed, 22 Sep 2021 16:25:30 +0000
Market Blog Wednesday, September 22, 2021 Few had even heard of distressed Chinese property development giant Evergrande a week ago and now it’s the biggest headline for markets. This week in the latest LPL Market Signals podcast, Ryan Detrick and … Continue reading →
Published: Tue, 21 Sep 2021 15:58:52 +0000
Market Blog Tuesday, September 21, 2021 Well that was fun while it lasted. Yesterday, the S&P 500 closed below its 50-day moving average for the second consecutive day, breaking a streak that had held for the duration of 2021 and … Continue reading →
Published: Fri, 17 Sep 2021 20:02:16 +0000
Market Blog Friday, September 17, 2021 Index Performance View enlarged chart. U.S. and International Equities Major Markets Finish Lower Amid Delta and Earnings Growth Concerns The major markets finished lower for a second straight week. Friday’s quadruple witching where individual … Continue reading →
Published: Fri, 17 Sep 2021 15:58:13 +0000
Market Blog Friday, September 17, 2021 Chinese property developer Evergrande’s liquidity crisis has sparked fear and massive selling in Chinese property stocks over the past several weeks. The big question is could this be the first domino to fall, sparking … Continue reading →
Published: Thu, 16 Sep 2021 15:58:05 +0000
Economic Blog Thursday, September 16, 2021 U.S. consumers shocked economists in August with their willingness to spend in the face of recent jitters over the economic outlook. This morning, the U.S. Census Bureau released August retail sales data showing overall … Continue reading →
Published: Wed, 15 Sep 2021 15:58:22 +0000
Market Blog Wednesday, September 15, 2021 With summer (un)officially over, investment-grade corporate bond sales are ramping up again. Despite a four-day week last week, thirty-eight investment-grade companies sold $60.5 billion in the first two sessions, breaking a record for the … Continue reading →
Published: Tue, 14 Sep 2021 17:41:57 +0000
Economic Blog Tuesday, September 14, 2021 After a crazy summer of nosebleed inflation readings, we may finally be starting to see signs of transitory inflation. The Bureau of Labor Statistics released the August Consumer Price Index (CPI) data this morning, … Continue reading →
Published: Fri, 10 Sep 2021 19:59:12 +0000
Market Blog Friday, September 10, 2021 Index Performance U.S. and International Equities Major Indices Show Modest Weekly Declines as Delta Worries Mount All major markets finished lower as the investor concerns over the Delta variant, Federal Reserve (Fed) tapering, … Continue reading →
Published: Fri, 10 Sep 2021 15:58:02 +0000
Market Blog Friday, September 10, 2021 Fun Fact Friday: The Dow Jones Transportation Average is actually the oldest US stock market index in existence, even older than the more-popular Dow Jones Industrial Average. Charles Dow developed the index, originally called … Continue reading →
Published: Thu, 09 Sep 2021 16:16:03 +0000
Economic Blog Thursday, September 9, 2021 According to LPL Research’s analysis of the Federal Reserve’s (Fed) recently released Beige Book, business sentiment on Main Street has declined in recent months as the economy navigates the latest wave of COVID-19, but … Continue reading →
Published: Wed, 08 Sep 2021 15:58:03 +0000
Market Blog Wednesday, September 8, 2021 This week in the latest LPL Market Signals podcast, Ryan Detrick and Lawrence Gillum discussed global central bank policy, recently weakening economic data, and where stocks and bonds could go the remainder of this … Continue reading →
Published: Tue, 07 Sep 2021 15:58:58 +0000
Market Blog Tuesday, September 7, 2021 The Covid-19 pandemic was an unprecedented shock to a large majority of global economies. But the economic damage was met with an extraordinary global monetary response with the Federal Reserve (Fed), European Central Bank … Continue reading →
Published: Fri, 03 Sep 2021 18:19:55 +0000
Market Blog Friday, September 3, 2021 Index Performance (as of 12:50 PM ET) View enlarged chart. U.S. and International Equities Emerging Markets Rebound The major markets finished mostly higher building on last week’s gains. Emerging markets, as represented by the … Continue reading →
Published: Fri, 03 Sep 2021 15:58:53 +0000
Economic Blog Friday, September 3, 2021 It seems to be two steps forward, one step back for the U.S. labor market. The U.S. Bureau of Labor Statistics released its August employment report this morning, revealing that the domestic economy added … Continue reading →
Published: Thu, 02 Sep 2021 15:58:30 +0000
Market Blog Thursday, September 2, 2021 The Institute for Supply Management’s reading on U.S. manufacturing surprisingly accelerated in August, coming in at 59.9 versus July’s 59.5 and economists’ consensus expectation of 58.5. The solid reading does show the resiliency of … Continue reading →
Published: Wed, 01 Sep 2021 19:00:08 +0000
Market Blog Wednesday, September 1, 2021 Index Performance View enlarged chart. U.S. and International Equities All of the U.S. major market indexes finished August higher despite concerns about the COVID-19 Delta variant, with the S&P 500 Index making it seven … 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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