[00:00:01] Speaker A: You're listening to PTC point of view, brought to you by preferred trust company, the preferred custodian for all alternative investments. We're here to provide retirement savers like you with the tools you need to succeed. Need a confidence boost when it comes to investing outside of the stock market? Do you want the power to build a tax sheltered nest egg that will last through your golden years? You've come to the right place. Turn up your speakers and turn off cruise control because we're taking you on the alternate route to investing with your IRA.
[00:00:38] Speaker B: Welcome back to another episode of PTC Point of view. Today in the studio we have Chris Trembley. She is the director of operations. And today we are talking all things contributions. Welcome, Chris.
[00:00:53] Speaker C: Thanks, Maddie. Glad to be here. Exciting contributions.
[00:00:56] Speaker B: Yeah. Right. So depending on the IRA account, individuals can deposit pretax or after tax dollars annually to reap the tax sheltered benefits. Annual contribution limits are set by the IR's. And as we know, they were upped this year, right?
[00:01:14] Speaker C: They were. They were increased this year by 500 for traditional and Roth accounts. So in the tax year for 2022 for traditional and Roth iras, you can make a contribution of $6,000 and then that up to 6500 for tax year 2023. So that was a nice little bump that the IR's gave seps. It bumped pretty significantly for a sep IRA. So it's the lesser of 25% of compensation or $61,000 for tax year 2022, and then actually jumps to 66,000 in 2023. So that's a $5,000 increase, which is pretty significant. And then for simple iras, it jumped 1500. So from 14,000 in 2022 to 1550 in 2023. So nice little bumps there.
[00:02:05] Speaker B: Yeah.
[00:02:05] Speaker C: Wow. And we didn't have any last year from the previous tax year, so this was nice to see the increase.
[00:02:11] Speaker B: We were ready for an increase.
[00:02:12] Speaker C: We were ready for an increase. Yeah, it happens every couple years. We hope it happens every year, but, yeah, it's nice to see that.
[00:02:20] Speaker B: So can people make catch up contributions? What are those?
[00:02:24] Speaker C: Yes, they can. So then the IR's, in addition to your regular contributions, the IR's says that if you're 50 years or older, you can put in an additional thousand dollars to that base contribution. So, meaning in tax year 2022, if the contribution limit was $6,000 and you are 50 years old or older, you can put an extra thousand, making it $7,000. Then for 2023, it would be $7,500 versus 6500. But again, important, you have to be age 50 or older to make that catch up contribution. But that's pretty significant as well.
[00:02:58] Speaker B: They're kind of just making sure that people are getting ready to retire. They're getting up towards that age.
[00:03:03] Speaker C: That's right. They have as much advantage as they can. They give you a little extra catch up there so they can give you some padding there on your retirement account.
[00:03:11] Speaker B: Very nice.
[00:03:12] Speaker C: Yes.
[00:03:13] Speaker B: So we mentioned 2022 contributions and 2023. So that's obviously important for the fact that they can contribute to both. Am I right?
[00:03:23] Speaker C: This is correct. This is kind of the sweet spot for making contributions. So during this period of time, now that we've hit the new tax year, you can actually still contribute for 2022 and contribute for 2023. You can make contributions to your IRA for 2022 all the way up until tax day. So you can really maximize the available amounts that you have to invest by putting in both contributions. Right. By making one for 2022 and 2023. And then if you're 50 years or older and you haven't done your 2022, you can up to 14,500. You make 2022 and 2023. So that's a huge amount of contribution.
[00:04:03] Speaker B: Say they have a traditional IRA. Can they contribute $6,500 in 2023 to preferred trust company and another company?
[00:04:13] Speaker C: No, and that's a great question because a lot of people get confused by that. So you don't want to over contribute. So the contribution amounts are all in for all of your traditional iras or your Roth IRAs. So if you have a traditional IRA over at TD Ameritrade and you've already made a $6,500 contribution for tax year 2023, that is it. You can't make any more. But let's say you've made $3,000 to TD Ameritrade. That means you can make 3500 over at preferred trust company. So just be sure you're aware. I know sometimes people don't realize they've made a contribution to one and then they make it to the other. So it's all in.
[00:04:51] Speaker B: So what happens if someone were to contribute more than the limit and they.
[00:04:55] Speaker C: Got to take that out or they're going to get a penalty, so they've got to remove that in a distribution.
So we always recommend that you talk to your CPA and keep going back to that because they're going to recommend the best way to do that. But basically, you got to take that money back out.
[00:05:09] Speaker B: So you mentioned after 50, they can contribute $1,000 more than the average person are people able to contribute after they turn 72?
[00:05:21] Speaker C: Yes, they are. Actually, as long as you have earned income, regardless of your age, you can make a contribution. So there used to be a set limit to that, but the IR's has kind of done away with that. And so, yeah, you can contribute even after your age 72.
[00:05:39] Speaker B: That's new, right?
[00:05:41] Speaker C: Fairly new, yes.
[00:05:42] Speaker B: So I'm wondering, are people eligible for IRA contribution tax deductions in 2023?
[00:05:50] Speaker C: So you or your spouse are, if you're covered by an employer retirement plan, certain conditions must be met to deduct the contributions to a tax deferred account, IRA account. So that is traditional SEP simple. From your annual tax burden, the filing status and income of you and or your spouse affects whether the deduction is phased out or they mean reduced or eliminated. So the IR's increased eligibility by bumping up the income range criteria that begins the phase out or the elimination for taxpayers from tax deferred IRA benefits. So you want to go to IRS dot gov and kind of look at those phase out limits and ranges so that you know if you're able to take tax deductions for your contributions. And again, important, we always go back to talking with your CPA is really helpful because they're going to have all of that information at their fingertips. For preferred trust company. We're not licensed tax professionals. We don't know what your income. We don't know. Those are things we don't know. We may know about you, but we don't know a lot about your spouse and all your filing status and that kind of thing. So we can't by law, give you. I know sometimes clients get frustrated with us because they want us to give them the answer, but the truth is we are not licensed to give the answer. So you don't want us giving that answer. We can go off of what the IR's states in general, and then you really need to be working with your CPA on that information.
[00:07:20] Speaker B: Are people eligible for a Roth IRA contribution in 2023?
[00:07:25] Speaker C: So the filing status and income of you and your spouse affects the ability to make Roth contributions. And sometimes, again, it's based on a phase out or elimination, based on your filing status and the income. It doesn't necessarily affect your ability to perform roth conversions. So you can do some conversions from a tax deferred retirement account, like a traditional account. So if you have a traditional account and you want to convert to a Roth, now's a great time to do that and then start making contributions. And again, to adjust for inflation. The IR's has increased the eligibility by increasing the income range criteria that begins the phase out or elimination for taxpayers from making Roth contributions. So you'll want to look again and check it out on the IR's website. That information is always posted. Those phase out ranges basically are and eliminations ranges are posted on the IR's website.
[00:08:25] Speaker B: Now that we're in January, I'm sure people are starting to wonder when they are going to start receiving their tax documents. So when can clients at preferred trust company expect to get their tax documents for this year?
[00:08:39] Speaker C: So as long as their account is still open, their tax documents will be uploaded to their client portal. They will be able to retrieve them on Tuesday, January 31. So that includes forms 5498, which is the form that we report to. We use to report to the IR's the value of your IRA as of December 31, 2022. It also reports any contributions you might have made through tax year 2022. It also reports any conversions, account conversions that you might have or rollovers that you might have had during tax year 2022. So you will be able to get that form, form 5498, through your portal on Tuesday, January 31. Now if you've taken any distributions in tax year 2022, meaning you took or received personal cash out of your IRA from preferred trust company during 2022, then you're going to receive a 1099 r and that is also going to be available through the portal on Tuesday, January 31. Now if you've closed your account anytime in tax year 2022, those documents will be mailed to your address that we have on file for you.
We can help you get your documents through your portal if you're still a client of ours. If you're having any trouble accessing your account, our client service representatives are available to help you Monday through Friday. Just give us a call, shoot us an email, and we can get you logged into your account so you can download download those documents. And then, like I mentioned, if your account did close anytime in 2022, you won't necessarily have a form 5498 because your account wasn't open as of December 31. But if you did take distributions in 2022 and your account is closed, maybe you took a distribution to close the account. That 1099 will be mailed to you.
[00:10:33] Speaker B: So you mentioned distributions.
Do they also get a tax document? If they take an in kind asset distribution, they do.
[00:10:40] Speaker C: Same form 1099 r, they will actually, clients sometimes wonder about this because they might see more than 110 99 r in their portal. If you took any type of distribution of an asset let's say you had to send your precious metals that were once held in your IRA to you personally, and you got a cash distribution. You're actually going to have two forms that's required by the IR's. You're going to have one form for the asset distribution and one form for the cash distribution. So you could have potentially more than 110 99 r. Great question.
[00:11:14] Speaker B: Yeah. So really quickly, why would someone want to contribute to their IRA here at preferred trust company versus ATD Ameritrade or somewhere like that?
[00:11:24] Speaker C: So it just depends on what you're looking to accomplish, basically what your investment goals are. Sometimes you can reach a certain ROI much quicker with an alternative investment. It depends on what you're investing in. Obviously, you have got more capital to make an investment with the more that you contribute. So you have that opportunity to get into. Obviously, some investments have a lower barrier to entry than others.
So maybe that $6,000 contribution is going to push you over the edge to be able to make a bigger investment.
And then also depending on what type of assets you have in your account, for people who have investment properties at preferred trust company, it's important you keep enough cash in the account to be able to take care of that investment property to pay the expenses that are associated with it. And so to maximize that amount that you have available is important as well. So definitely want to just take an overall look at your accounts and figure out what your end goal is. Obviously, the more you contribute, the more opportunity you have to invest. The more you invest, the more opportunity you have to grow your retirement account exponentially.
[00:12:41] Speaker B: It's always good to know your options, right?
[00:12:42] Speaker C: That's right. Absolutely. Yeah. You want to sock away as much as you can because. Right. You don't want to end up being at retirement age and go, oh, my gosh, I guess I should have contributed more, or I guess I should have put in more. I'm never going to be able to retire on what little bit I've saved. So it's important to think about that long term, especially for the younger age. I think we start thinking some of times we don't think about retirement until we're way past that point. So it's important to kind of look at what your overall goals are. How do you want to retire? Do you want to retire comfortably? Do you want to retire better than you're living today? I mean, that's the whole idea, is that we reach retirement age and we can actually retire and don't have to keep working unless we want to. Obviously but those are all things to consider. So the more you contribute, the better off you're going to be later on in life.
[00:13:27] Speaker B: Okay. Well, I think that answers all of the questions that we had. Thank you so much for coming on the episode today, Chris.
[00:13:34] Speaker C: As always, you're welcome. Happy to help.
[00:13:36] Speaker B: And to our listeners, thanks again for listening to another episode of PTC Point of View. We'll see you next week.
[00:13:43] Speaker C: Bye.
[00:13:45] Speaker A: Thanks for joining us for another episode of PTC Point of View, where retirement savers meet alternative investments. Know someone who's struggling with a retirement strategy? Tell them about our show. Can't wait for the next episode. To learn more, visit our
[email protected], or give us a call at 997,892.
