Where does the time go? With the first quarter of 2011 nearly in the history books and spring upon us, it’s a good time to review your financial affairs before entering the “la-la land” of summer. One important item that should be reviewed is your IRA and/or your Roth IRA.
If you’ve recently realized you owe the IRS some money, you may want to contribute to an IRA to lower your tax debt. On the other hand, if you don’t owe taxes, it’s a perfect time to contribute to a Roth IRA for a tax-free future. If you are a bit hesitant to contribute to a Roth because you may need access to these funds, bear in mind that you can always access your Roth contributions penalty and tax-free, regardless of your age or how long you’ve held the Roth.
The good news is that the IRS allows you to make a 2010 contribution for either of these IRAs until April 15, 2011. All you need to do is declare which year you are making the contribution for so your IRA custodian knows how to credit the account. Should you elect to make a contribution for 2011, do so now to avoid waiting until the last minute.
Here are a few points to remember before contributing:
- Any and all contributions must come from wage or self-employment income. This means you can’t make a contribution using your investment or rental income. However, if there is only one wage earner in the household, you are allowed to contribute for each spouse up to the maximum limits.
- You can contribute up to $5,000 per spouse for 2010 and 2011 or $6,000 for the same years if you’re over 50.
- Don’t wait until the last minute! If you’re going to contribute, do it now.