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Roth IRA

The Roth IRA is a great technique for retirement saving. To be eligible for the full annual $3,000 per person contribution to a Roth IRA in 2003, the year in which this book is being written, married couples may have no more than $160,000 adjusted gross annual income and single people may have no more than $100,000 of adjusted gross annual income. Smaller contributions are allowed for couples with income between $150,000 and $160,000 and singles with income of between $95,000 and $110,000. I could give you a fancy explanation of “adjusted gross income,” but the easiest way to identify it is by just looking at the figure on line 33 of your Form 1040. These figures change from time to time. For current figures you should consult the various tax websites found in Favorite Websites at the end of the book.

To let us aging baby boomers play a little catch-up when it comes to saving for retirement, taxpayers who are at least fifty years old can contribute in 2003, for example, an extra $500 for a maximum annual contribution of up to $3,500. In 2006 that catch-up amount will rise to an extra $1,000. And speaking of making that contribution, although you can make a contribution to an IRA for the previous year up until the April 15th tax filing deadline, you are obviously better off if you make your contribution earlier in the year. The reason is that the sooner you get the money in the account, the sooner it starts growing, either tax deferred or tax free depending on which kind of IRA you choose.



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