Although
2012 has come and gone, you can still contribute money into your IRA for the
2012 tax year. But the deadline is
nearing fast. For all you
procrastinators, you have until Monday, April 15th, 11:59pm Eastern
time to do it!
For
the majority of readers here, a Roth IRA will be the way to go. I’ve previously written about opening a retirement account and investing with Vanguard.
Since
Dec 1st, 2011, I’ve been regularly plugging away at my Roth IRA (and other investments like my 401K). With
today’s new market highs, my total returns (in less than a year and a half) are
doing pretty well:
Sure these aren't life changing returns, but the returns have been stable and consistent. I
don’t expect the market to always do this well. In fact, there will likely be ups and downs in the next few
months. However, each time the
market drops, I’ll use those opportunities to pick up more shares on sale.
For
2012, you can still contribute up to $5,000 ($6,000 if age 50+).
These contributions are made with after
tax dollars, so you cannot deduct your contributions. The upside is that withdrawals on your account after age 59
½ are not taxed without minimum required distributions. I’ve written about the contribution
limit changes here.
For
single filers: you can contribute up to the limit if your income is less than
$110,000, with a reduced contribution if your income falls between $110,000 to
$125,000. If your income exceeds
$125,000, you cannot contribute to a Roth IRA.
If
you file jointly as married: you can contribute up to the limit if your income
is less than $173,000, with a reduced contribution if your income falls between
$173,000 to $183,000. If your
income exceeds $183,000 you cannot contribute to a Roth IRA.
In
order to contribute to a Roth IRA, you must have earned income in the year you
want to make a contribution. This
means you must have received income from work you performed including salary,
alimony, and military pay. This
does not include interest and dividends from investments, income from rental
property or pension payments. You
can only contribute up to your earned income.
The
more you invest today, the more your investments will pay off in the future. If your IRA has already been open but hasn’t been maxed out for 2012, time is running out to do so. If you still haven’t opened up an IRA
yet, do it. Go to www.Vanguard.com and pick a target retirement fund. You can always change your account holdings later.
No comments:
Post a Comment
Comments? Questions?