John M. Hoffman & Associates CPAs

Frequently Asked Tax Questions

Individual Retirement Accounts – IRAs

 

“How do you suggest we figure what to do?”

Our number one rule is that you should always maximize ROTH contributions when you can, if there is little or no tax benefit to making tax deductible contributions. Positioning yourself to earn tax free income for life is a wonderful thing.

Our other suggestion is to talk with us about your retirement and other savings during the year and at tax time. We always suggest that you first contribute to your company 401(k) plan to the extent of the company match. In terms of contributing to the 401(k) plan above that, if you can afford it we think that makes sense.

But what if you have done the 401(k) to the extent of your company match and you have $2,000 more that you would like to add to some sort of retirement savings. You are trying to decide between traditional and ROTH IRAs or just adding the $2,000 to the company 401(k) plan. There are too many variables for a standard answer. This is where we suggest that you ask us for guidance at tax time or earlier in the year.

Lastly we want to remind you that with the uncertainty of social security in the long term horizon, the importance of having your own retirement savings is more and more critical. While some crystal balls might show that the government may need to reduce social security benefits to those who have adequate retirement savings (easier to take money away from people who have it than from people who don’t) we still would prefer to be in the group of people with retirement savings than those without.

Save and save often!