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Roth IRA question

Discussion in 'The Lounge' started by jarheadk5, Feb 10, 2007.

  1. jarheadk5

    jarheadk5 1/2 ton status

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    I'm finally doing the application for a Roth IRA today, and the application is asking me if I want my contributions to count for this tax year or last tax year. I have no idea on this - I'm pretty much clueless when it comes to this stuff...

    Sooo, what effect will this selection have on me tax-wise??
     
  2. BigBen

    BigBen 1/2 ton status Premium Member

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    The Roth won't affect your taxes at all... persay.

    You are only allowed to put in $4000 per tax year for a Roth. (may be different based on age/other items.... not important here).

    You can also contribute up until tax day after the tax year.

    For example... I started mine in Feb of 06 and put in $4000 for Tax year 05.
    That meant I could still put away $4000 for Tax Year 06 until April 15 of 07.

    Does that make any sense? This time of year, I'd ALWAYS put it on last year's contribution. That's more you can put in this year.

    Either way, your taxes will stay the same since a Roth is funded 'after tax. The awesome part is that they'll never tax your income (from the Roth)!

    Hope this helps.

    -Ben
     
  3. BigBen

    BigBen 1/2 ton status Premium Member

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    The other thing I learned about a Roth that I really like is that you can pull your principal out at any time without penalty. You just can't touch the earnings until retirement.

    I don't plan to use that feature, but it's nice to always know that there's a 'dire emergency' fund sitting there collecting at $4k/year.... if I ever needed it.
     
  4. jarheadk5

    jarheadk5 1/2 ton status

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    Sweet. Thanks for the info!
     

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