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01/10/02 - Roth IRA's: Just Do It

By: Frank Armstrong, CFP, AIF

It's not too late to make your contribution to 2001 Roth IRA. You can open an account, and fund it right up until your filing deadline, which for most of us is April 15, 2002.

If you had "earned" income, and your Modified Adjusted Gross Income (MAGI) was:

• Below $150,000 for a married couple filing jointly, or
• Below $95,000 for Single, head of household, qualifying widow(er), or married filing separately but did not live with spouse for any part of the year, then you can make the full $2000 contribution.
• Partial contributions are for allowed for MAGI up to $160,000/$110,000.

Income limits, MAGI definitions, and a worksheet to determine partial contributions are in pages 48-52 of the IRS Pub 509.

(You will need acrobat reader to view this document, download it here)

While Roth IRA's aren't deductible, withdrawals are tax-free. The Roth isn't subject to the minimum required distribution rules at age 70 ½, and your contributions can be withdrawn before age 59 ½ in an emergency without penalty. But unlike a traditional IRA, you can contribute at any age, and regardless of whether you participate in a qualified plan at your employer. Also don't forget that your non-working spouse can also fund a Roth if you both qualify under the limits.

For 2002, the contribution limits increase to $3000, or $3500 if you are over age 50. There are few more attractive ways to save and invest for your retirement. If you qualify, it's a no-brainer. Just do it!

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