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2. For individuals who do not have access to an employer-provided retirement plan, Individual Retirement Accounts (IRAS) are
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a) How much can you deposit on you IRA account if you are less than 50 years old?

ANSWER: The maximum contribution limit for people under 50 years old is $6,000 for 2019.

b) How are the contributions treates for tax purposes? in other words, how does this contribution affect your taxes?

ANSWER: The IRA contribution is deduted from you income, which means it lowers the taxable income, and hence, the tax bill.

if the person is single, IRA contribution can be fully deducted from their income (no matter the income amount). If the person is married and the spouse has workplace plan can also deduct it completely only if oyu are married filling jointly and your modified adjusted gross income (MAGI) isn´t more than $196,000.

c) When you make withdrawals in retirement, how are the distributions and the investments returns (the money you withdraw) taxed?

ANSWER: when it happens, both the initial investment and the gains it earned are taxed at your income tax rate in the year you withdraw it. Besides, if you withdraw money before you reach age 59½, you will be assessed a 10% penalty in addition to regular income tax based on your tax bracket. In a few words, withdrawals are considered an income so they increase your taxable income and your tax bill,

There are some exceptions to avoid the extra 10% penalty. The person must find out if the reason for the withdrawal qualifies to be excepted or not of such penalty.

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