Individual Retirement Accounts (IRAs) are one of the best wealth building tools available. In addition to earning income tax free, IRAs are one way to use “other people’s money” to save. I have made a contribution to my IRA every year that I have been eligible to do so.
The deadline for making one's 2006 IRA contribution is April 17, 2007. Normally, it would be April 16 since April 15 is a Sunday. However, recent legislation made April 16 a holiday in Washington D.C., giving all of us an extra day to file our taxes. For 2006, the maximum IRA contribution is $4000 per person with a $1000 catch-up contribution for people 50 or older.
Traditional IRA contributions are 100% deductible for Modified Adjusted Gross Incomes (MAGIs) up to $50,000 (single) and $75,000 (married filing jointly). Higher MAGIs may be able to deduct part of their IRA contribution. People with MAGIs over $60,000(single) and $85,000 (married filing jointly) cannot deduct traditional IRA contributions.
Roth IRA contributions are not deductible and the maximum contribution can be made for MAGIs up to $95,000 (single) and $150,000 (married filing jointly). Higher MAGIs may be able to make a contribution less than the maximum. People with MAGIs over $110,000 (single) and $160,000 (married filing jointly) cannot make Roth IRA contributions.
For more details on IRAs, see IRS Publication 590.
For more on The Practice of Personal Finance, check back every Wednesday for a new segment.
This is not financial or saving advice. Please consult a professional advisor.
Copyright © 2007 Achievement Catalyst, LLC
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