I need to contribute $6500 to an IRA. I am trying to reduce my tax bill. Can you tell me which IRA's to consider?

I am 59 years old w/ a small business (S-Corp; I file IRS form #1120S) and I own rental property also. In 2014 I inherited taxable income from my father's estate. I am trying to reduce my tax bill.

I currently have two Fidelity IRA's: Magellan & Growth & Income.

Asked by Suzee

4 Answers

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Hello Suzee. I was asking the same question years ago. I run a small business and so I’m always looking for a way to reduce taxes. I went with the traditional IRA (T/IRA) because it is a pre-tax vehicle which reduces my taxable gross. I, too, have it with Fidelity, and when I contribute the same max as you do, I pay less in taxes. That would not be the case with a Roth IRA. So, if I made 100K in 2014 and I contributed $6500 to my T/IRA, my taxable gross is reduced to $93,500. Add other expenses (to include HSA contributions!) and the total works to drive down the tax bite. One last item: I contribute the amount as early in time as possible so that it has more time under an interest rate to increase the return. | 02.10.15 @ 19:37
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 17:33
Answered by Wade Slome , CFA, CFP® in Newport Beach, CA
Hi Suzee. To answer your question, let's better our understanding of IRA's. An IRA is not a product offered by an investment company, it is simply an account, much like a checking or savings account. You can open one at a bank, or at a brokerage like Fidelity. Its what investments you choose to use in your IRA that is important. It appears you currently have two different mutual funds in your retirement account (s). In order to determine if these are a good fit for you, you would need to talk with an advisor about your risk tolerance, liquidity needs, and future financial goals. In addition to mutual funds, ETFs are a great way to invest at a lower cost. | 02.19.15 @ 20:02
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 17:33
Answered by Arin Moradian, Financial Adviser in Glendale, CA
It depends, do you have employees for your business, has the business been in place less then 3 years. If so, you can put up to $52,000 in a SEP IRA.

If you like to put away money in an individual account, then it would be a regular IRA. | 03.04.15 @ 00:20
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 17:33
S
Answered by Suzee
I do have 6 employees and have been in business 21 years. | 03.06.15 @ 13:32
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Dave Bradley, Investment Manager (Financial Advisor) in North Charleston, SC — Hi Suzee. As a business owner with employees, you could set up a 401(k) and use an employer match. https://www.irs.gov/Retirement-Plans/401%28k%29-Resource-Guide Various types of IRA's can do this also. The SEP usually has the highest deductions. Restrictions apply https://www.irs.gov/Retirement-Plans/Choosing-a-Retirement-Plan:-SEP We love self directed retirement plans. You can set these up using a 401K or IRA,. The main benefit is getting a higher ROI. The tax deduction is one side of the equation. You still pay the tax when taking the funds out. Here is another strategy: $6500 in a tax deferred plan will double to $13000 in 5 yrs at 15%. $6500 in a tax deferred plan will double to $13000 in 15 yrs at the market rate How much do you need the plan to give you in return. Why not let those $$ work just as hard for you as you have for them. We can customize something for you & your employees. Just send us a message to discuss in greater detail. No obligation It's not what you make, It's what you keep that determines your lifestyle. | 04.11.16 @ 17:27
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 17:33
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