Planning | Live a Life By Design

The Millennial Perspective: A Family to Call Their Own

Posted on September 11, 2020May 13, 2021 by Ashley Stieb

Many millennials, wrongly. get a bad reputation for “ruining” everything. One of the acts we have been blamed for is ruining the traditions and norms for starting a family. However, there are many reasons why millennials are starting families later in life than previous generations. In a previous article, I wrote about the cost of higher education and how it compares to wages in the United States. In that article I discussed how tuition and the cost of goods rise nearly every year, but average wages stay the same and, in most cases, don’t keep up with inflation. One factor that weighs mightily, as one of the primary reasons my generation delays starting a family until later in their twenties, or even their thirties, is money.

Starting a family can be difficult from the start. In this age where everything is digital, dating can be difficult for some. It seems to become more difficult to meet people unless you are matching on a dating app, but dating apps aren’t ideal for everyone. This is one reason that millennials are finding significant others and starting from point A later in life than previous generations. Weddings can be really cheap, but they can also be really expensive and for those that wish to have a big wedding, the money can be a set back and delay the process. This can delay everything that follows, including having children. Children are also very expensive and many millennials will opt to find the perfect time, though everyone will tell you the timing is never perfect, when they have a stable cash flow which can come later in life because of low wages in starting jobs with or without a college degree

Another reason that millennials may wait to start a family is school. Juggling a child and attending college can be difficult for many people, but the money factor also ties back into this equation. Oftentimes you will note that millennials will wait until they have finished school to even consider having a child and starting a family. You may also find that millennials may not hold a desire to have children. This can also be for many reasons which are personal to those individuals, but in passing, I have met couples that wish to travel more in life which could be difficult with children. Some have concerns about the state of the world and do not wish to bring a child into it.

On top of everything, we are now dealing with COVID-19. Pregnant women are on the high-risk list and have been from the start because scientists and doctors are not sure what the long-term effects could be on an expectant mother and the child. This can be scary when starting a family or even adding to one, so out of an abundance of caution for their future many people are opting to hold off on having children at this time.

At the end of the day, it is important to remember that everyone, no matter their generation, has their own reasons for why they do the things they do or don’t do. Times change as do ethics and even if something isn’t done exactly the way it used to be that doesn’t mean that the younger generations are ruining anything. Regardless of the reason they have, that choice is their own and there is nothing wrong with that. The liberties exhibited by millennials are those they learned from their ancestors – you. I would say, with great modesty, the millennial generation will build the future of this country and make their lineage proud.

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Eliminating the Top Three Fears of Pre-Retirees

Posted on August 14, 2020August 17, 2020 by Jimmy J. Williams, CPA/PFS, CFP®

Retiring is a big step in life for most people. Along with this new lifestyle comes the fear of the unknown. You do not have to be subject to these fears if you simply follow the process outlined in this article.

Let’s identify three fears causing the greatest concern for pre-retirees. First, most people have enjoyed a career where they receive consistent paychecks and benefits. At retirement, there is a sudden realization that the ever-flowing money and benefits immediately stop! You don’t have to feel this way if proper planning has been performed. For example, if you have saved properly in your employer retirement plan, a series of consistent payments can be established to provide you a lifestyle you desire. Proper assumptions must be considered when establishing this stream of cashflow to confidently assuage the underlying fear of “running out of money”.

Why would you work so hard all of your life to simply exist in retirement? I am pretty certain that no one listed “barely survive” as a retirement goal! Start saving for retirement early and you will reap the benefits of living a life you desire.

The second fear of pre-retirees is the unknown cash needs of other family members while the retiree is enjoying life. When planning and analyzing the needs of the potential retiree, it is critical that you consider the needs of other family members you have supported during your career. What I am referring to is the “sandwich” generation. Some individuals are not only caring for their retirement needs but the needs of their parents and/or children (hence the name, “sandwich” generation). Challenges to the traditional family structure have been monumental in the past two decades. In years prior, the retiree had only their existing household to care for during the period after employment. Now, the retiree may be called upon to assist in college funding, caring for an elderly parent, etc. The world is a different place today and these considerations should be given some thought during the planning process.

To alleviate this fear, consider allocating a certain amount of funds to be invested in a manner that provides for these needs. Are there assets of your parents that may have considerable value but no cash flow capabilities? If so, perhaps selling the property would provide sufficient support for your parents’ futures. If not, this special fund would give you confidence that your retirement is secure while also meeting your obligations you desire to undertake for your family members.

The third and final fear of pre-retirees is the rising cost of medical care and its negative impact on their retirement assets. This is a tough one for most people. Proper medical care is necessary to allow you to enjoy the highest quality of life in retirement. However, with medical care rising approximately 6% per year for pharmaceutical and physician visits, a significant ailment could wreck your well-planned future. Consider utilizing Medicare Programs to your advantage. For example, it is critical that you consider a supplemental plan to your Medicare Parts A and B coverages. The remaining 20% of inpatient costs would be a material burden on your assets and cashflow if you were required to pay it out-of-pocket. There are many types of supplemental plans that cover various levels of support. Analyze them and consult an expert for guidance to select the proper plan for your needs.

If you are concerned about the rising cost of prescription drugs, and are enrolled in Medicare, consider the Medicare Part D Program. You may find sufficient coverage for your needs for a small premium each month. One caveat to this plan is that you will be penalized for enrolling in a period after you are initially qualified at age 65. For example, after your 65^th birthday, you are eligible to enroll in Medicare Part D.

However, your health is great and you don’t expect a costly amount of prescriptions. Then the unimaginable happens – at age 68 you experience a significant health event that requires expensive medication each month. You quickly enroll in Medicare Part D at the next enrollment period and realize that your monthly premium seems higher than you remembered at age 65. The difference in rates is the late enrollment penalty calculated at 1% of the national base beneficiary premium assessed each month from your originally qualified enrollment date to the month you enrolled in the program. In our example above, 36 months had lapsed from the date of the originally qualified enrollment date for the individual which means the monthly premium penalty would be 36%. As a result, your monthly premium for Medicare Part D coverage would be 36% higher than the national premium. As you can see, this penalty can become material rather quickly.

There are many factors to consider prior to retiring. We have a saying we use with our clients, “You retire for the first time only once. Don’t make a lifetime mistake when you do so.” Retirement planning is a process that should be addressed in advance and, to provide the greatest probability for success, consult a professional that specializes in retirement planning. Life is meant to be lived, not feared.

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Three T’s of Successful Retirement Planning

Posted on July 24, 2020July 24, 2020 by Jimmy J. Williams, CPA/PFS, CFP®

Making a major life decision is not to be approached in a haphazard manner. Many people underestimate the impact of retirement on their lives and have “buyer’s remorse” once the process is complete. How can you experience a more positive and proactive outcome to retiring? Simply follow the “3 T’s” outlined below and you will gain tremendous confidence and control over your new phase of life.

Establish a Team

The first “T” is to establish a team. Many aspects of life allow you only one opportunity to get things right and this is one of them. Financial, estate, cash flow and tax considerations must be addressed in the process of planning to retire. Often clients come to our office for a meeting about their retirement and certain elections chosen by the individual are irrevocable. Elections in the format in which you will receive your retirement benefits, Medicare and Social Security Benefits and other critical lifestyle choices may have lifelong ramifications. You should consider assembling a team consisting of, at a minimum, a CPA, a Certified Financial Planner™ practitioner, an estate planning attorney and your spouse or significant other. Why do you wish to include your spouse/significant other? Do you know how your relationship may be changed by each of you spending the majority of your day together? It is critical that you listen and coordinate your plans for retirement with your team.

Timing

The second “T” is timing. When is the best time to retire? How can you maximize retirement income by electing benefits offered by your employer, SSA Benefits and other support income during your retirement years? The key to properly timing your approach to launch into this next phase of life is to understand the qualitative issues and work to resolve them to your benefit with similar gusto as you do your quantitative needs. Emphasis is generally given the monetary issues of retirement only to realize your plan failed to consider the importance of emotional issues about the changing lifestyle you may find yourself. Work with your wealth advisor to determine if you have addressed all facets of retirement and the timing is in your best interest.

Transition

The third and final “T” is for transition. Successful individuals that transition smoothly to and enjoy retirement are those that understand their time is more valuable than their wealth. Purpose is required of each of us to live a fulfilling life. Why would you wish to devote most of your early life to work and career only to be miserable after your leave employment? That, to me, is not success. However, the person who understands that she has talents, time and treasure to devote to others may find a more rewarding experience in the retirement phase. Consider your plans to travel, join civic groups, devote your time to education in other fields of interest, etc. You must understand that with today’s medical advancements, you may spend as many years in retirement as you did in your career. With that in your mind, wouldn’t you feel more confident knowing that you addressed the Three T’s of Retirement Planning?

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Selling the Farm? Think About This Tax-Saving Election!

Posted on July 20, 2020July 20, 2020 by Jimmy J. Williams, CPA/PFS, CFP®

You worked your entire life and a significant amount of your family’s wealth is tied to the family farm. This scenario is experienced by many families in the U.S. How do you obtain your value from the land and pay the least amount of income tax? There is a way.

The income tax laws, referred to as the Internal Revenue Code in the United States, provides for families to retire from the farm without paying current income taxes on the transaction. As you can imagine, there are a few caveats and requirements to performing such a transaction. This type of land transfer is known as a “like-kind exchange”. In recent years the regulations governing this type of transaction have been refined to allow property held for productive use or investment (i.e., the farmland) to be exchanged with other investment property to defer the tax on the potential gain in the land.

Think about this approach. Mr. Jones has a farm which consists of 640 acres of pastureland. He purchased the land 40 years ago. His basis in the land is $100 per acre or $64,000 for the total parcel. However, Mr. Jones is ready to retire and decides he wants to sell the property. Today, the land is worth $1,000 per acre or $640,000 for the total parcel. Mr. Jones visits his CPA to discuss his decision to retire and sell his land. The good news is that Mr. Jones is retiring. The bad news is that his federal tax bill on the sale of the could be as much $128,000!

To defer the tax bill to its latest due date, Mr. Jones’ CPA informs him of a structure that allows Mr. Jones to exchange his farm land for other land that is held for investment. Perhaps Mr. Jones would desire to own rental properties that would generate cash flow to supplement his retirement?

This area of law is very specific but can provide significant benefit to taxpayers. Two important timelines are required to be met to treat the property received in the exchange as “like-kind” property: 1) The property to be received must be identified within 45 days after the taxpayer’s property is relinquished in the exchange; 2) The property transaction shall be closed within 180 days after the relinquished property is transferred to the other party.

Additional parties are involved in this type of transaction. A qualified intermediary is utilized to transfer the deeds, hold the deposits and to execute the transaction on behalf of the two exchange parties.

Before you simply decide to sell your farm, think about other opportunities to mitigate the tax bill. You will be glad you did.

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The Millennial Perspective: The Cost of Learning

Posted on June 26, 2020May 13, 2021 by Ashley Stieb

I’m sure we have all heard of student loans the mountains of debt that come with them. Every generation has or has had student loan debt. Millennials, surprisingly, don’t have the highest average amount of student loan debt though. However, I think that we may have the hardest time balancing the debt with other aspects of being an adult. When people in Gen X, the generation with the highest average amount of student loan debt, were accumulating that debt, many Millennials were still learning to read and the cost of goods across the nation were a lot cheaper than they are now. Housing was cheaper making it easier for the generation before us to invest in a home following graduation. Food and gas were a lot cheaper too. Tuition, on the other hand, was starting to rise.¹

According to Business Insider, the cost of tuition has increased 260% between 1980 and 2014. In dollars, this equates to $9,438 for four years including room and board to $23,872. Along side this, inflation has seen an increase of around 120%. Now let’s look at the cost of minimum wage. In 1980 minimum wage was $3.10 and increased every couple of years until it stopped increasing in 2009 when it reached $7.25. While this is a significant increase in terms of percentage, it has not kept up with the cost of consumer goods and it certainly hasn’t kept up with the cost of tuition. This has caused the Millennial generation to fall behind on getting a real start on life.

Like any type of loan, student loans come with an interest rate and different types of loans have different types of rates. Federal student loans issued by the Department of Education range from 3% to 6% interest while private student loans issued through banks, such as Discover or Wells Fargo, start at 8% and go up from there. The process of getting federal student loans can be difficult for some and this struggle can be caused by a number of things. For some, their parents or guardians may make too much money to allow them to qualify for any financial aid until they are 24 years old, married, or have a child. Others may have done poorly in their courses causing them to lose their eligibility. In these cases, the options to pay for school are left up to scholarships, cash, private loans. The repayment options for these different types of loans differ greatly as well. With federal loans, you can often be placed on an income-based repayment system allowing for your monthly payments of the total sum of your loans to match your income. On the other hand, private student loans do not have this option unless they are consolidated. A new private loan is issued per semester and typically has a $50 monthly payment that starts after graduation, meaning that you could be looking at a $400 a month payment after graduation. Regardless of the type of loan or the amount of the monthly payment, it can be difficult to get these loans paid off in a reasonable time frame and get a start on building a life because of the lack of increase in income for new graduates.

¹ Business Insider: How College Tuition has Skyrocketed Since 1980

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Financial Literacy: The Key to Successful Kids

Posted on June 22, 2020June 22, 2020 by Jimmy J. Williams, CPA/PFS, CFP®

One of the wisest statements made about planning for the future can be found in an ancient Chinese proverb: “The best time to plant a tree is 20 years ago. The second-best time is now.” This is a philosophy that is applicable to your finances.

Our schools are bombarded with challenges in teaching students the important lessons to equip them for life – algebra, science, English, literature, etc. I firmly believe this list of important lesson should include financial literacy. Starting to understand and apply financial concepts at an early age will empower the children to initiate better habits that will ultimately give our communities and country a better financial future.

Financial literacy is a term we use for the subject of financial planning concepts and the act of securing one’s future in a comfortable and confident manner. By initiating such subjects as savings, investing, budgeting, taxes, credit, and other vital areas of life at ages as early as 10, you are setting your child up for success in their future. Too often children are in college or after before they realize what they don’t know. This is on us! As parents, not only should we be responsible for the physical, cognitive and emotional well being of our children but we should include their financial understanding as well.

An area to start a child’s understanding of financial matters is teaching them the value of planning for tomorrow. If a child desires a certain toy or game, ask them how they would pay for the game. Does your child have responsibilities around the house that teaches them that all family members must share in the household duties? If so, perhaps you could negotiate an allowance or “hourly rate” for completing their chores. However, to continue the lesson of financial responsibility, you will save one-half or more of their earnings each week in a savings account. I have often learned with my own children that items purchased with their earnings are cared for much better than those items given them.

Teaching children about the use of banks and proper credit are good starting positions for them understanding these institutions. When I was a very young boy, my parents took me to meet their banker. I was in awe at the marble floors, high ceilings and when he showed me the vault – WOW! I knew at that moment that I wanted to be involved in the finance in some form. But the words of John Gillson, my parent’s banker, still ring clearly in my mind to this day – “Take care of your credit and it will take care of you.” What Mr. Gillson actually meant was that one should only use credit when absolutely necessary and, in the manner, needed to bridge the short-term cash flow needs of the person.

It is critical that our children understand the importance of finance in their lives. The best future you could help them achieve begins with a basic understanding of the impact finance has on their lives and how to appropriately utilize financial concepts to help them live life to its fullest. For additional resources about teaching children about financial concepts, view our Compass Capital Management Videos. Until next time, I’ll see you on the golf course!

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Why Saving For The Future Matters?

Posted on June 5, 2020June 4, 2020 by Jimmy J. Williams, CPA/PFS, CFP®

Forty-one percent of Americans believe they would be able to cover a $1,000 emergency with savings, according to a survey conducted by BankRate in January, 2020. The chickens certainly came home to roost with the COVID-19 pandemic! The more disturbing findings of the survey were that 37% of the respondents would use their credit card to resolve the emergency. The lack of savings in the United States has reached critical stages for most families. To prepare your family for inevitable times of critical cash flow emergencies, I am providing you a proven strategy that will provide you with the confidence to weather emergencies in the future.

Some of the most common “emergencies” to strike families are automobile mechanical damages, large appliance failures, emergency medical care and loss of employment. Just one of these instances could spell disaster for your family without adequate savings to mitigate the disruption. During the pandemic, too many people have felt the anxious feeling of unemployment and wondering how their family will survive. Luckily, for many, the state and federal unemployment programs have been far richer in benefits than otherwise could have been. With the temporary additional federal unemployment benefit of $600, some individuals have “earned” more cash flow while being unemployed than experienced from their actual job.

First, review your expenditures currently experienced by your family and choose one item of lesser importance to you from the list. This is the item that will no longer be purchased and the funds previously spent for this item will be automatically drafted each month from your checking account to your savings account. What this process does is take away the resistance of human nature to change by asking your financial institution to do the hard work for you. How this is accomplished is by visiting (or calling) your bank and asking them to perform an ACH (automated clearing house) transaction for you in a specific amount on the same date each month. Once you have adjusted your mindset to the alleviation of this item, choose the next least desired item on your list and continue this process until your family’s budget reflects only those expenditures that truly provide your family enjoyment. The ultimate goal of the process of saving for your future is to maintain 90 to 120 days of living expenses in a liquid account in case (and they always do) an emergency strikes your family.

Second, if you are capable, consider seeking a part-time job or side gig. During the summer months you may have an opportunity to work in the evenings or weekends performing odd jobs or lawn work to increase your cash savings. This seasonal employment activity is an excellent method of increasing your cash reserves but may also tempt you to increase your lifestyle. This is where discipline must be exerted. Let’s say you earned an additional $200 in a week on your evening job. If you deposit these funds in your bank account, ask your bank to transfer them to your savings account instead of leaving them in your checking account. By performing this transfer your account will appear as though you have the same amount as always but your savings account will be increasing for your family’s safety. Any incremental increase in income, such as a bonus from your employer, should be treated in a similar manner.

Lastly, you may have accumulated assets which you no longer use such as additional lawn equipment, stored furniture, etc. Why not sell these items and place the proceeds in your family’s emergency fund? You may be surprised what someone will pay for a used piece of equipment!

The key to providing confidence and security for your family is the consistent monitoring of expenditures coupled with a mindset toward saving. Your bank most likely has an app for your phone that you can access with a couple of clicks. The challenge is to forgo looking at the increasing savings account everyday thinking it is available to you for a family vacation or new TV. No, this money is for the next emergency to strike your family. You will be glad you were disciplined and can face the next catastrophe with greater security.

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The Millennial Perspective: My House, My Rules

Posted on May 29, 2020May 13, 2021 by Ashley Stieb

Picture it: a nice starter home with a yard for children and pets to run and play. A place for you to gather with family and friends. A place to call your own. Many millennials dream of buying and owning a home, but how many actually do? According to Urban Wire, the most recent study on this was conducted in 2015 when the youngest millennials were 18 years old and the oldest were 34. At that time, only 37% of millennials were home owners. Now, five years later in the year 2020 I am sure this number has grown considering most millennials are past college age and heading towards their 30s and 40s. However, I decided to conduct a study of my own and ask my fellow millennials about their home buying experience, if any.

I asked my friends a series of questions:

Do they own a home or have they ever owned a home?
If so, what was their buying process like?
If not, what is holding them back?

Several people that responded do, indeed, currently own a home and a few of the older millennials are even in their second home. Some of them qualified for special loans which allowed them to make the purchase without a down payment. Others saved just about all they could manage to make their dream come true even if it took several years and some had help from their families. Those that do not and have never owned a home gave a good list of reasons that seem to be a general consensus for a lot of millennials. From that list, several stated that they haven’t purchased a home yet because houses are too expensive. They would rather save until they find a home that they love at a price point that works for them than buy a house at what they could afford, but want to upgrade it or even buy a newer home within a few years. Some also stated that they don’t know where they want to end up, they aren’t married and don’t have kids yet and want to make sure that when and where they buy is just right.

Being a millennial comes with a lot of uncertainties. A lot of us are in the turning point of our lives where we transition from college age to being a “real adult.” We want to make plans and live a life that we deserve, but at the end of the day, life gets more and more expensive and the job market and average income can’t compete. Now we have lived through and will certainly feel the repercussions of two financial crises for many years to come. However, all this being said, the current trends for the housing market predict that another housing market crash may be imminent, but it could open up the opportunity for many people in my generation to finally be able to say those famous words that our parents shared with us many times, “my house, my rules,” so long as the job market and income allows.

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Planning for the Future

Posted on May 22, 2020May 22, 2020 by Jimmy J. Williams, CPA/PFS, CFP®

“There is nothing certain in life but death and taxes.” This is my paraphrase of Benjamin Franklin’s famous quote to Jean-Baptiste Leroy in 1789. Imagine the tax rates imposed by the King of England in the days of the colonies and those assessed by our nation, The United States of America, to fund its services today. Our government budget continues to swell with the costs of programs administered by the U.S. Government to serve our citizens and their needs caused by an international pandemic.

A review of the President’s Budget for Fiscal Year 2021 is typically analyzed by those of us in the financial planning profession to determine where priorities will lie for the administration and Congress. Our government is bigger than any corporation I can think of in sheer number of employees or economic impact on the world. Now, this article is not judging the government’s function or disfunction. The purpose of this article is to provide you an understanding of the enormity of our government and comparison of the type of budgeting to that of a typical family.

One of the primary areas addressed by this budget is the outlook or vision of the administration. Like our government, we individuals should have a written plan for the future. Unlike our government, we are not allowed to print money to fund our own operations. (Well, we can’t print money legally.) You and I must work within the means we generate through our efforts or investments to provide for our housing, food, healthcare and other necessities of life. What has happened to many Americans is a microcosm of what is happening in our government services – borrowing to continue operations in the manner we wish versus that we can afford.

As of September, 2019, the average family in America owed credit card debt in the amount of $6,849 (according to a December 2, 2019 article by Erin El Issa published in Nerdwallet). The cause of most credit card debt is a lack of budgeting and controlled spending. Too often we seek immediate gratification instead of saving for a particular object. By disciplining yourself to only seek debt for the necessities in life such as a home or automobile, you may avoid a tremendous amount of hardship for your family’s cash flow burden.

The U.S. Government currently owes a debt balance, and it changes by the second, of more than $24,000,000,000,000. How do we pay for a debt this large? First, we must think about revenues. Currently, the U.S. Marginal Income Tax Rates for individuals consists of rates ranging from 10% to 37%. Our system of taxation is known as a progressive tax system – the more you earn in taxable income the higher your marginal tax rate. Sounds simple, right?

Based on a recent report, in 2018 the U.S. Government relied on individual income taxes as the primary source of tax revenue. Our citizens contributed 40.72% of the total revenue needed to support services! Let’s take a quiz. If the costs of government functions and services are rising, what is the most obvious form of taxation that will eventually need to rise to pay for the services in a balanced budget? You guessed correctly if you said “personal income taxes”.

The goal of each family should be to plan for their future, care for the members of the family and serve their fellow man. Our country is the greatest on the planet. We could help sustain our greatness for all mankind by exercising a few simple disciplines in our spending and plan for the future. Another of my favorite quotes attributed to Benjamin Franklin will guide us to a better future – “A penny saved is a penny earned.”

Monday is a holiday when we recognize those who served our country – our servicemen and servicewomen of the armed forces. Those celebrated this Memorial Day made the ultimate sacrifice for our freedoms and liberties we now enjoy in the United States of America. To these celebrated heroes I simply, reverently and respectfully, say, “Thank you”.

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IRA Law Changes That Affect You Now!

Posted on April 28, 2020April 28, 2020 by Jimmy J. Williams, CPA/PFS, CFP®

If you are receiving required minimum distributions from an IRA, you may have an opportunity to lower your tax burden for 2020! The Coronavirus Aid, Relief and Economic Security (CARES) Act includes a waiver for required minimum distributions for 2020. This provides immediate relief to taxpayers who were being forced to pay tax on the distribution but had no economic need. Another reasoning for this provision of the Act was to allow investors to retain their investments within their IRAs during a time our economy was contracting. Further, the required minimum distribution is based on the balance of the account at December 31, 2019. The markets were much higher than they are currently. The waiver applies to traditional and Roth inherited IRAs, too.

To provide immediate tax reduction, individuals under the age of 59½, who need funds to continue their lifestyle, may receive up to $100,000 of IRA premature distributions in 2020 and the 10% penalty for early distribution will be waived. However, the distribution is taxable. Good news for these individuals is that the tax due on the distributions may be evenly spread over three (3) tax years to be repaid.

If you are in the process of preparing and filing your 2019 individual income tax returns, you may contribute to your 2019 IRA up to July 15, 2020. This contribution would normally be allowed only to the date of April 15. By providing taxpayers the opportunity to build additional cash flow for their households, the extension of time to fund an IRA may allow investors to open or fund an IRA that otherwise would not be feasible.

Limits for IRA contributions for 2019 remain at $6,000 for Roth and Traditional IRAs. For those age 50 or older, an additional “catch-up” contribution of $1,000 is allowed. If you or your spouse, as married filing joint tax filers, wish to contribute to an IRA for 2019, your modified adjusted gross income must be $103,000 or less. If you are a single filer, your modified adjusted gross income must be $63,000 or less to contribute the full amount allowed in a Traditional or Roth IRA. The limit for IRA contributions for the 2020 tax year are the same as those in 2019.

Earnings limits for contributions to an IRA, while participating in an employer plan, are increased to $65,000 for single filers and $104,000 for married filing joint filers. The preceding amounts of modified adjusted gross income allow the taxpayer(s) to fully deduct their IRA contributions.

Lastly, one of the better changes to the IRA rules, for 2020, is the allowance of contributions to an IRA by individuals older than 70½. There is no age limit to make contributions to a Traditional or Roth IRA in 2020. This is a big bonus for many individuals who are savers. A tax deduction that you get to keep in your own account!?!? Welcome to the crazy world of taxation in the United States. See you on the golf course!