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Question for the Money Doctors

Question submitted on Apr 24, 2010.


I am 59 and have money in CDs only. Is it too late to invest in IRA / Roth IRAs?


It is not too late to create a traditional or Roth IRA and make contributions to it as long as you meet certain rules.  First, you must receive compensation (earned income) which includes alimony, but does not include pensions, annuities or other forms of deferred compensation.  You must be under 70 ½ to contribute to a traditional IRA, while no such age restrictions apply to a Roth IRA.

The maximum combined contribution that can be made to a traditional or Roth IRA is $5,000 for 2011.  Any individual who will be at least 50 years old at the end of the year may contribute an additional “catch-up” contribution of $1,000.  An individual may contribute to both a traditional IRA, and Roth IRA, however, the total contribution cannot exceed the maximum of $5,000 (and $1,000 for the catch-up provision).  The maximum deduction that can be made to an IRA may be limited if the individual (or spouse) is an active participant in a retirement plan maintained by an employer.  

You have until the due date of filing your tax return (not including extensions) to make a contribution which will be treated as having been made during the prior year.

Your IRA may hold almost any investment, including a Certificate of Deposit, but are restricted from investing in “collectibles (e.g. antiques or stamps).

Contributions to a traditional IRA are tax deductible while contributions to a Roth IRA are not.  However, distributions from a traditional IRA are taxable when withdrawn while Roth IRA distributions are tax-free.

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