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  #1  
Old 04-12-2009, 09:08 AM
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IRAs?

I just thought I'd remind anybody who may have not funded an IRA for last year that the deadline for 2008 contributions is Wednesday.

I'm getting pretty short of funds lately, but when I saw how much I was going to have to pay on top of the taxes I'd had withheld this year, I bit the bullet and maxed out my contribution for 2008 ($6,000.00 if you're 50 or over). Doing so saved me close to $1700. I'd rather give it to myself than to the gubmint.

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  #2  
Old 04-12-2009, 02:33 PM
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And since you're over 50, you won't have to wait to long to get your hands on the money with no penalties at age 59.5.
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  #3  
Old 04-12-2009, 02:42 PM
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Saving $1700 is an interesting question. Assuming you don't have a Roth and you don't start taking withdrawls for some years, one has to consider how much the tax will be at withdrawl time - especially in view of the higher taxes we will all be paying to cover the current financial sector bailout.
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  #4  
Old 04-12-2009, 03:32 PM
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Quote:
Originally Posted by 280EZRider View Post
Saving $1700 is an interesting question. Assuming you don't have a Roth and you don't start taking withdrawls for some years, one has to consider how much the tax will be at withdrawl time - especially in view of the higher taxes we will all be paying to cover the current financial sector bailout.
Can't be a Roth in the example provided as taxable income was lowered resulting in less tax due.

Having a good mix of Savings, Roths and Traditional IRA's makes playing the future tax game easier.
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  #5  
Old 04-12-2009, 03:37 PM
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Originally Posted by TMAllison View Post
Can't be a Roth in the example provided as taxable income was lowered resulting in less tax due.

Having a good mix of Savings, Roths and Traditional IRA's makes playing the future tax game easier.
I don't worry about it-- I just go to Hashim's fruit market and buy more cash that they print in the basement. Best time is when it's down to 10 cents on the dollar.
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  #6  
Old 04-12-2009, 04:22 PM
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Doesn't the one time IRA contribution deduction get phased out with higher income?

PS. I hate our tax system and the mental slavery it creates.
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  #7  
Old 04-12-2009, 04:27 PM
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Quote:
Originally Posted by 280EZRider View Post
Saving $1700 is an interesting question. Assuming you don't have a Roth and you don't start taking withdrawls for some years, one has to consider how much the tax will be at withdrawl time - especially in view of the higher taxes we will all be paying to cover the current financial sector bailout.
I'd rather take the money out of one of MY pockets and put it back into another one of MY pockets, than to put so much of it in the gubmint's pocket. Presummabley, once I begin taking money out of it, I'l be in a lower tax bracket, but hopefully by then, my house will be paid for.
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The Dee8gonator 1987 560SEC 196,000 miles - Sold
Orgasmatron - 2006 CLS500 90,000 miles
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  #8  
Old 04-12-2009, 04:31 PM
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Originally Posted by raymr View Post
Doesn't the one time IRA contribution deduction get phased out with higher income?

PS. I hate our tax system and the mental slavery it creates.
I think a flat tax or a national sales tax would be much better. I particularly like the idea of a national sales tax since it only taxes consumption. Consume less and you get taxed less.

OT: The thread title made me think of the provisional Irish Republican Army and their bonehead offshoot "Real IRA."
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  #9  
Old 04-13-2009, 01:50 AM
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Quote:
Originally Posted by Dee8go View Post
I'd rather take the money out of one of MY pockets and put it back into another one of MY pockets, than to put so much of it in the gubmint's pocket. Presummabley, once I begin taking money out of it, I'l be in a lower tax bracket, but hopefully by then, my house will be paid for.
That's essentially what I've been doing many years. I am in the enviable position of having more liquid assets available for dispersal from non-IRA monies, than IRA-funding -- even after 35 years or so of opening my first IRA.

Best thing going as far as it's worked out for me!
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  #10  
Old 04-13-2009, 08:17 AM
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Starting today, I am self-employed. I tried this once before, many years ago before the advent of the SEP-IRA. Hopefully, this will work out well enough that I'll be able to defer the taxes on the entire $48-50,000 allowable. We'll see. At any rate, the allowable ceiling is MUCH higher than it would be if I was working for someone else.
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1998 Lincoln Continental - Sold
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The Dee8gonator 1987 560SEC 196,000 miles - Sold
Orgasmatron - 2006 CLS500 90,000 miles
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  #11  
Old 04-13-2009, 11:16 AM
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Going from memory here.

The SEP has a very high contribution limit but it is a strict profit-sharing plan and the limit (high $40K's as you mention) cannot exceed 25% of your earnings. (That's if you earn on a W-2. If you are a partnership or sole proprietor there is a more complex calculation that determines your maximum contribution) So you would have to pay yourself @ $200K to benefit fully from the SEP. There are other options that might suit your situation better.
Check with your tax or financial adviser for more detail or PM or e-mail me.
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  #12  
Old 04-13-2009, 01:52 PM
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Originally Posted by cjlipps View Post
The SEP has a very high contribution limit but it is a strict profit-sharing plan and the limit (high $40K's as you mention) cannot exceed 25% of your earnings. (That's if you earn on a W-2. If you are a partnership or sole proprietor there is a more complex calculation that determines your maximum contribution) So you would have to pay yourself @ $200K to benefit fully from the SEP. There are other options that might suit your situation better.
Check with your tax or financial adviser for more detail or PM or e-mail me.
According to my understanding of SEP IRAs, I'm not understanding your writings of SEP IRAs.

Here is my understanding of SEP IRAs:

1) The SEP has no dollar contribution limit. It is based on percentage only.
2) It is not always a strict profit-sharing plan. I have a SEP IRA, and I am not under any profit-sharing plan for my business.
3) The limit is definitely not the high $40Ks per individual. There is no cap that I'm aware of.
4) It may have changed, but I thought 15% of net self-employed income (with no income cap) was the annual maximum percentage saving limit.
5) A SEP has absolutely nothing to do with a W-2.
6) There is no more complex calculation just because you are a sole proprietor, or partnership. It only depends on how much you earn.
7) Earning as much as $200K would not have anything to do with the percentage you can sock away for yourself. -Since 15% of $200K is $30K, which is a whole lot more than the $6,000.00 present cap for a self-directed, or Roth IRA. There are income caps limiting ones's eligibility to participate in Roth IRAs.

The facts is, if you are making the big bucks, a SEP is the way to go, for that particular year. If not, a Roth is usually the better small IRA tool for that year. Anybody can look up the IRS' tax code on-line and check their own situation.

Last edited by Skid Row Joe; 04-13-2009 at 02:06 PM.
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  #13  
Old 04-13-2009, 02:30 PM
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Originally Posted by Skid Row Joe View Post
According to my understanding of SEP IRAs, I'm not understanding your writings of SEP IRAs.

Here is my understanding of SEP IRAs:

1) The SEP has no dollar contribution limit. It is based on percentage only.
2) It is not always a strict profit-sharing plan. I have a SEP IRA, and I am not under any profit-sharing plan for my business.
3) The limit is definitely not the high $40Ks per individual. There is no cap that I'm aware of.
4) It may have changed, but I thought 15% of net self-employed income (with no income cap) was the annual maximum percentage saving limit.
5) A SEP has absolutely nothing to do with a W-2.
6) There is no more complex calculation just because you are a sole proprietor, or partnership. It only depends on how much you earn.
7) Earning as much as $200K would not have anything to do with the percentage you can sock away for yourself. -Since 15% of $200K is $30K, which is a whole lot more than the $6,000.00 present cap for a self-directed, or Roth IRA. There are income caps limiting ones's eligibility to participate in Roth IRAs.

The facts is, if you are making the big bucks, a SEP is the way to go, for that particular year. If not, a Roth is usually the better small IRA tool for that year. Anybody can look up the IRS' tax code on-line and check their own situation.
Here we go again.

I'll concede #2. I misspoke regarding the profit-sharing aspect. It is sometimes tied to profit-sharing but not always.



http://www.irs.gov/retirement/article/0,,id=111419,00.html

Interested to know where you get your "understanding" of a SEP. Here's where to look.
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Last edited by cjlipps; 04-13-2009 at 02:37 PM.
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  #14  
Old 04-13-2009, 02:54 PM
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Originally Posted by cjlipps View Post
Going from memory here.

Interested to know where you get your "understanding" of a SEP. Here's where to look.
Same place as your's......

I also "recommended the IRS' website."

Good luck!
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  #15  
Old 04-13-2009, 03:08 PM
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Max contributions for SEP's
2008 = $46,000
2009 = $49,000

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