April 18, 2016 is the deadline to establish and/or make a contribution to your IRA for 2015.
All family child care providers should make a serious attempt to set up an Individual Retirement Account (IRA). You will obtain a significant tax benefit when you save money for your retirement through an IRA.
There are four basic IRAs:
- Traditional IRA: Contributions are tax deductible. Interest is tax deferred. You will owe taxes when you withdraw the contributions and the interest it has earned. Maximum contribution is $5,500 per person ($6,500 if you are age 50 or older).
- SIMPLE IRA: Contributions are tax deductible. Interest is tax deferred. You will owe taxes when you withdraw the contributions and the interest it has earned. Maximum contribution is $12,500 of your profit ($15,000 if you are age 50 or older). You must have established a SIMPLE IRA by October 1, 2015 to make a contribution by April 18, 2016.
- ROTH IRA: Contributions are not tax deductible. Interest is tax free. You will not owe taxes on either your contributions or interest earned when you withdraw them. Maximum contribution is the same as a Traditional IRA.
- MyRA: This is a new IRA for 2015. It is a federal government-sponsored direct deposit program. It is guaranteed not to lose any money and there are no annual fees. Maximum contribution is the same as a Traditional IRA. You can open it with as little as $25. For more information: https://myra.gov/. See also my article, “Now Anyone Can Set Up a MyRa.”
Don’t let the tremendous tax savings available with IRAs pass you by. Start by saving a small amount of money each month, even if it’s only $5 a day.
If you saved $5 a day for 5 days a week you would have $1,250 at the end of the year. If you invested this in an IRA that earned 8% each year, you would have $19,127 at the end of just ten years.
It’s never too late to save money. If you saved $10 a day at age 52 and earned 8% a year in an IRA, you would have $294,000 by the time you reached age 70.
Choose to save. You can do it!
Tom Copeland – www.tomcopelandblog.com
Correction: My original article gave April 15th as the deadline. But, since that day is Washington DC Emancipation Day it is pushed back to Monday, the 18th. Thanks to Barbara DelBene.