And the countdown is on…April 15th is right around the corner. Some of you may have already filed your taxes, some getting ready to file, and others, well, let’s just say you are hiding behind your desk with your eyes closed wishing this day would never come.
Regardless of which of these profiles best describes your enthusiasm about tax day, I want to tell you about a powerful vehicle for funding your retirement that is often overlooked during tax season, simply because it doesn’t provide any immediate tax relief as far as deductions or credits are concerned. This little power house my friends is the Roth IRA, and you can still make your contribution for 2011 up until April 15th of this year. Why is the Roth IRA so wonderful? Let me count the ways:
- Contributions, while not tax deductible, grow tax free and distributions are tax free.
- You never have to take distributions, meaning that you can leave your Roth IRA to your heirs, tax-free.
- Even if you maxed out your 401k for 2011, you can still contribute to a Roth IRA if your income is under these limits set by the IRS each year. Now this is what I call maximizing your retirement planning opportunities.
- You can always pull out the amount of money you originally invested in a Roth (not the earnings), free of penalty and free of taxes. (If you converted your traditional IRA to a Roth, you must wait 5 years).
- The Roth can be a great vehicle for funding higher education.
If you are a young professional in a low tax bracket, I can’t emphasize enough the potential benefits of contributing to a Roth IRA, which are mainly a factor of time and compound earnings. What are you waiting for? If you haven’t yet filed for 2011, you can still contribute up to $5000.00 into a Roth IRA, $6000.00 if you are 50+. Don’t waste away this opportunity to set yourself further down the path to financial freedom. You will thank yourself for it later!
“A penny saved is a dollar earned.”