Published: Wed, 04 Aug 2021 13:33:01 +0000
Market Blog Wednesday, August 4, 2021 LPL Financial is so excited to kick off our annual Focus conference, with more than 10,000 attendees sharing ideas, learning, and having a great time over the next three days. Given the world we … Continue reading →
Published: Tue, 03 Aug 2021 15:58:25 +0000
Market Blog Tuesday, August 3, 2021 Most investors are aware that seasonal patterns exist in equities, but they may not be as familiar with the seasonal patterns in fixed income markets. As pointed out in the LPL Research Market Blog … Continue reading →
Published: Mon, 02 Aug 2021 17:00:29 +0000
Market Blog Monday, August 2, 2021 Index Performance View enlarged chart. U.S. and international equities In July, the U.S. major market indexes finished higher while international equities, as represented by the developed international markets (MSCI EAFE), and the emerging markets … Continue reading →
Published: Mon, 02 Aug 2021 15:30:06 +0000
Market Blog Monday, August 2, 2021 Hard to believe, but we are in August already! The good news is stocks are still firmly in a bull market, but the bad news is the calendar is a potential worry now. As … Continue reading →
Published: Fri, 30 Jul 2021 20:11:06 +0000
Market Blog Friday, July 30, 2021 Index Performance View enlarged chart. U.S. and International Equities Markets Reverse Course This Week; Growth Names Pullback The major markets finished the week lower, reversing course from the previous week. Some disappointing corporate guidance … Continue reading →
Published: Fri, 30 Jul 2021 15:58:08 +0000
Market Blog Friday, July 30, 2021 China’s stock exchanges have been hit hard in response to several sudden regulatory actions that have dismayed investors. First came the crackdown on ride sharing service DiDi, which has about a 90% market share … Continue reading →
Published: Thu, 29 Jul 2021 16:58:48 +0000
Market Blog Thursday, July 29, 2021 In the latest edition of LPL Market Signals, the LPL Research strategists discuss some of the biggest surprises of 2021, including the strong year-to-date performance for the stock market and surprising recent drop in … Continue reading →
Published: Thu, 29 Jul 2021 15:58:41 +0000
Economic Blog Thursday, July 29, 2021 Lofty expectations for second quarter gross domestic product (GDP) growth were left somewhat wanting as a decent headline number fell short of expectations. Peering under the hood, though, we think this is still a … Continue reading →
Published: Wed, 28 Jul 2021 15:58:10 +0000
Market Blog Wednesday, July 28, 2021 We had some fun with our latest LPL Street View video, as Director of Research Mark Zabicki and Chief Market Strategist Ryan Detrick went outside to shoot some hoops and talk about our upcoming … Continue reading →
Published: Tue, 27 Jul 2021 15:58:46 +0000
Market Blog Tuesday, July 27, 2021 The Federal Reserve (Fed) meets this week to discuss its ongoing support for the U.S. economy. During its regularly scheduled two-day meeting, the nineteen-member committee is expected to discuss if and when the Fed … Continue reading →
Published: Fri, 23 Jul 2021 20:01:13 +0000
Market Blog Friday, July 23, 2021 Index Performance View enlarged chart. U.S. and International Equities Markets Higher as Growth Leads The major markets finished higher this week after starting the week lower, with the Dow Jones off by over 2% … Continue reading →
Published: Fri, 23 Jul 2021 15:58:33 +0000
Economic Blog Friday, July 23, 2021 On Thursday, July 22, the Conference Board released its June 2021 report detailing the latest reading for the Leading Economic Index (LEI), a composite of ten data series that tend to lead changes in … Continue reading →
Published: Fri, 23 Jul 2021 14:58:16 +0000
Friday, July 23, 2021 Top Story Buy the dip Even after Monday’s big drop for stocks in the U.S., stocks have roared back and are now looking at a nice gain for the week. Here are some of the reasons … Continue reading →
Published: Fri, 23 Jul 2021 13:58:08 +0000
Market Blog Friday, July 23, 2021 Inflation is soaring and Jerome Powell still isn’t overly worried about it. In fact, he was grilled by Congress last week and held his ground on his inflation views. This week in the LPL … Continue reading →
Published: Thu, 22 Jul 2021 15:58:37 +0000
Economic Blog Thursday, July 22, 2021 In data we received on Tuesday, July 20, U.S. Housing Starts increased 6.3% in June to 1.64 million units, a 3-month high. By region, housing starts rose in the South and West, and in … Continue reading →
Published: Thu, 22 Jul 2021 14:58:23 +0000
Thursday, July 22, 2021 Top Story Housing Starts were higher than expected this week (Tuesday), but the lack of housing supply still remains a problem. Housing starts were up 6.3% in June; continuing a sharp post-COVID rebound. The building activity … Continue reading →
Published: Wed, 21 Jul 2021 15:58:51 +0000
Market Blog Wednesday, July 21, 2021 Monday’s big down day was a harsh reminder of how markets actually can produce volatility. It was the worst day of the year for the Dow and only the second drop of 1% or … Continue reading →
Published: Wed, 21 Jul 2021 14:58:53 +0000
Wednesday, July 21, 2021 Top Story Time for a more significant pullback or correction? Stocks have had an amazing run, but here are some things to consider. The S&P 500 Index hasn’t had a 5% pullback since last October, right … Continue reading →
Published: Tue, 20 Jul 2021 15:58:56 +0000
Market Blog Tuesday, July 20, 2021 The National Bureau of Economic Research (NBER) announced yesterday that the COVID-19 recession is over. If things don’t feel all that different, it’s because they announced the recession ended in April 2020. Yes, that’s … Continue reading →
Published: Tue, 20 Jul 2021 14:58:17 +0000
Tuesday, July 20, 2021 Top Story The shortest recession ever is over…15 months ago The National Bureau of Economic Research (NBER) announced yesterday that the economy bottomed in April 2020, making the COVID-19 recession the shortest on record and the … Continue reading →
Published: Mon, 19 Jul 2021 14:58:33 +0000
Top Story Earnings season off to a great start Beat rates have been outstanding so far with 85% and 90% of S&P 500 companies beating earnings and revenue targets. Second quarter earnings growth is tracking to a nearly 70% year-over-year … Continue reading →
Published: Fri, 16 Jul 2021 20:00:56 +0000
Market Blog Friday, July 16, 2021 Index Performance View enlarged chart. U.S. and International Equities Markets Mostly Lower As Utilities and Real Estate Gain Ground Most major markets sold off this week as Q2 earning season kicks off. Market participants … Continue reading →
Published: Fri, 16 Jul 2021 15:58:58 +0000
Economic Blog Friday, July 16, 2021 This week has provided investors with a fresh batch of data carrying the potential to heavily affect the inflation debate. Tuesday brought us the Consumer Price Index (CPI) for June, while Wednesday saw the … Continue reading →
Published: Fri, 16 Jul 2021 14:58:30 +0000
Friday, July 16, 2021 Top Story Retail sales came in solidly above expectations Retail sales for June increased 0.6% month over month, ahead of Bloomberg’s consensus forecast for a 0.3% decline and following a 1.7% decline in May. Excluding autos … Continue reading →
Published: Fri, 16 Jul 2021 11:58:27 +0000
Economic Blog Friday, July 16, 2021 Sentiment on Main Street remains strong as the U.S. economy continues to move towards normalcy, but concerns about the impact of a strong but uneven recovery are rising as higher prices, supply chain bottlenecks, … Continue reading →
Published: Thu, 15 Jul 2021 15:58:50 +0000
Market Blog Thursday, July 15, 2021 What a first half of 2021! As quick as it was, the economy continues to pick up speed as well. In fact, this could be one of the better years of economic growth we’ve … Continue reading →
Published: Thu, 15 Jul 2021 14:58:43 +0000
Thursday, July 15, 2021 Top Story Street View Midyear Outlook 2021 In the latest LPL Street View video, LPL Financial Chief Market Strategist Ryan Detrick takes a closer look at what the LPL Research team thinks is coming in the … Continue reading →
Published: Wed, 14 Jul 2021 18:13:27 +0000
Market Blog Wednesday, July 14, 2021 Index Performance View enlarged chart. U.S. and International Equities This quarter provided positive results for all major market indexes. The top performer and standout was the growth-laden Nasdaq composite, which returned over 9% for … Continue reading →
Published: Wed, 14 Jul 2021 15:58:04 +0000
Market Blog Wednesday, July 14, 2021 To state the obvious, coal mining is a dangerous occupation. Not only do coal miners have to deal with collapsing tunnels and explosions, they also have to deal with the potential for dangerous carbon … Continue reading →
Published: Wed, 14 Jul 2021 14:58:06 +0000
Wednesday, July 14, 2021 Top Story Canary In The Coalmine? The 10-year Treasury yield’s fall of over 40 basis points (0.40%) has many investors asking if the bond market is signaling bad news about the economic recovery. The absence of … Continue reading →
Published: Tue, 13 Jul 2021 16:00:29 +0000
Market Blog Tuesday, July 13, 2021 LPL Research is proud to announce the release of Midyear Outlook 2021: Picking Up Speed. While the speed can be exhilarating as economic growth accelerates, it can also be dangerous. Our updated outlook is … Continue reading →
Published: Tue, 13 Jul 2021 14:58:24 +0000
Tuesday, July 13, 2021 Top Story Midyear Outlook 2021 launches today. While the speed can be exhilarating as economic growth accelerates, it can also be dangerous. Midyear Outlook 2021: Picking Up Speed is designed to help you navigate the risks … Continue reading →
Published: Mon, 12 Jul 2021 14:58:28 +0000
Monday, July 12, 2021 Top Story What will companies do for an encore? After a stunning first quarter earnings season, we expect more good news this quarter. At the same time, we acknowledge the second quarter will almost certainly be … Continue reading →
Published: Fri, 09 Jul 2021 20:07:36 +0000
Market Blog Friday, July 9, 2021 Index Performance View enlarged chart. U.S. and International Equities Most of the U.S. and international markets were fractionally higher this week as traders were concerned about a potential peak in the global recovery, declining … Continue reading →
Published: Fri, 09 Jul 2021 16:00:05 +0000
Market Blog Friday, July 9, 2021 The S&P 500 Index closed at a record high on Wednesday, yet investors seem increasingly on edge with the VIX Index, a measure of implied volatility on the S&P 500, spiking nearly 40% week-to-date. … Continue reading →
Published: Fri, 09 Jul 2021 14:58:17 +0000
Friday, July 9, 2021 Top Story Is This the Start of a Correction? Despite the S&P 500 Index making a record high earlier this week, investors are clearly on edge with the CBOE Volatility Index (VIX) briefly spiking more than … Continue reading →
Published: Thu, 08 Jul 2021 17:00:51 +0000
Market Blog Thursday, July 8, 2021 We mix it up this week on the LPL Market Signals podcast and bring on LPL Research’s Director of Research Marc Zabicki to discuss what he has learned about investing and working with Advisors … Continue reading →
Published: Thu, 08 Jul 2021 16:18:22 +0000
Economic Blog Thursday, July 8, 2021 The June Institute for Supply Management (ISM) Services Index was a bit softer than expected (60.1 vs. the Bloomberg consensus estimate of 63.5), although the overall reading remained near multi-year highs. The June figure … Continue reading →
Published: Thu, 08 Jul 2021 14:58:28 +0000
Thursday, July 8, 2021 Top Story Yesterday’s Federal Open Market Committee (FOMC) meeting minutes showed Committee is split on tapering Some members pulled forward their expectations for the appropriate timing of tapering while others noted that the “further substantial progress” … Continue reading →
Published: Wed, 07 Jul 2021 15:58:14 +0000
Market Blog Wednesday, July 7, 2021 To quote the great Frank the Tank from Old School, “We’re going streaking!” Although Frank had another idea, stocks have been streaking in some historic ways, both near-term and longer-term. Let’s start with the … 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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