• Traditional IRA's

• Roth IRA's

• Coverdell ESA's

• Simplified Employee Pension (SEP)

• Health Savings Accounts (HSA)

• Keogh Plans

• 401(k) Plans

• 403(b) Plans

• SIMPLE IRA's

Maximize to Minimize

One of the best ways to minimize your income taxes is to maximize your pre-tax contributions to a retirement savings plan.   The pre-tax contribution limits for 2008 are shown below.  Try to  maximize your contributions for this year for the double benefit of lower income taxes and higher retirement savings balances.

2008 Retirement Savings Contribution Limits

RETIREMENT:
Got Enough?

According to the 16 th annual Employee Benefit Research Institute's (IBRI) Retirement Confidence Survey of 2006, while a majority of U.S. workers think they'll be able to retire comfortable; most aren't saving nearly enough to meet that goal.

The survey found about 68 percent of workers are confident about having adequate funds for a comfortable retirement. Yet, more than half of all workers say they've saved less than $25,000 toward retirement. Even among workers 55 and older, more than 40% have retirement savings under $25,000.

This apparent over-confidence in workers' retirement savings is concerning to experts at a time when corporate pensions and retiree health insurance programs are disappearing across the country. And it is not secret the Social Security system will be strained without an overhaul.

What can you do to better your chances of a financially sound retirement?

Tip 1: Whenever possible take full advantage of your employer-sponsored retirement savings plan to maximize your contribution and the employer match if there is one.

Tip 2: Understand what tax advantaged retirement accounts are available to you. Popular employer sponsored plans allowing pretax contributions are: 401(k), 403(b), 457 and SIMPLE plans. And new this year, is a Roth 401(k) allowing after tax contributions, an employer match and tax-free withdrawals at retirement. Tax deferred plans are also available to the self-employed. SEP IRA, Simple and Traditional/Roth IRAs are among the more popular.

Tip 3: Determine if you are saving enough for a comfortable retirement based upon your age, savings and income. Most people do not take the time to see just how well positioned they are for their retirement.

Tip 4: A good rule of thumb is to plan to have annual retirement income of 70% to 85% of the income you receive in the years before retirement.

Your Social Security benefit, any pension payouts and income from retirement savings are the most common sources of income to comprise the 70 to 80%.

Tip 5: Given the extended life span of today's retirees, experts are suggesting withdrawal of no more than 4% to 6% of your retirement savings per year.

Traditional IRA's

Many taxpayers have one or more Individual Retirement Accounts (IRA). While it seems very simple to open and maintain, there are various rules about contributions, withdrawals and fees associated with them.

Some things you need to remember are:

IRA contributions are the lesser of compensation or $4,000. This limitation applies to all IRA contributions including the Roth IRA. Compensation includes wages, self-employment income, non-passive partnership income and alimony.

Form 5498 is an information form showing the value of your account at the end of the tax year along with the amount of contributions for the year. It is not attached to your income tax return. If you are making a contribution between January 1 and April 15, be sure to indicate which tax year the contribution should be credited to.

Taxpayers that are at least 50 years of age may make additional catch-up IRA contributions.  In 2007, the catch-up provision is $1,000.

Fees to set up or manage your IRA are deducted as miscellaneous deductions, subject to a 2% income adjustment if you pay the fee separately. Fees taken from your account are not deductible. If your spouse does not work, or makes less than $4,000 for the year, a spousal IRA can be set up. There are some limitations on deductibility. A contribution that is more than the amount permitted is an excess contribution. If that excess amount remains in your IRA, a 6% excise tax is assessed.  However, if you withdraw your excess contributions, plus the interest earned on that amount prior to filing your tax return, there is no excise tax.  Please note that you can no longer make contributions to a traditional IRA in the year your reach age 70 ½.

You cannot borrow money from an IRA or use it as security for a loan.

If you are an active participant in an employer-sponsored pension plan, you may still make an IRA contribution, but the deductibility may be limited.

Roth IRAs must be kept separate from regular IRAs.

IRA Income Phase Outs
If your adjusted gross income falls within established phase out ranges, the deductibility of an IRA contribution is reduced. For the year 2007, the IRA income phase-out ranges are $80,000 to $100,000 for couples and $50,000 to $60,000 for singles.