Your IRA Questions Answered
The following is a transcript of "Money Girl's Quick and Dirty Tips for a Richer Life," a podcast from QuickAndDirtyTips.com. The audio program is available via RSS feed here and at TheStreet.com's podcast home page.
Hello and welcome to Money Girl's Quick and Dirty Tips for a Richer Life. Today's topic: more answers to your questions about investing for retirement. Several of you have asked questions about investing for retirement and I want to answer some more of your questions in today's episode.Taxes and Converting to a Roth
A listener named Ashish emailed me with this question:Can I contribute to a traditional IRA account after taxes? I don't qualify for tax deductions due to income limits. I'm doing this so that I can convert my traditional IRA to a Roth in the year 2010. Secondly, will I have to pay taxes at the conversion time in 2010 if I contribute to a traditional IRA after taxes?Great questions, Ashish. The answer to your first question is yes. You can make non-deductible contributions to a traditional IRA even if you're not eligible to make deductible contributions. Although you miss out on the tax deduction, you still get the benefit of tax-deferred earnings growth. The IRA contribution limit for 2007 is $4,000 and it will go up to $5,000 in 2008. If you're age 50 or older, you can contribute an additional $1,000.
Advantages of Converting to a Roth in 2010
Your strategy to contribute to a traditional IRA now so that you can convert it to a Roth in the year 2010 is an excellent one. Since your income is too high to allow you to contribute to a Roth now, by planning ahead and contributing to a traditional IRA first, you'll have a healthy sum to convert to a Roth come 2010.- Loading Comments...
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