Here's one for me . . .

[Guest Mrilaomt]

I just finished my taxes and decided to do the $3,000 to an IRA (b/c I am not eligible for company profit sharing plan for another year, etc.). Here's what may end up being a stupid question . . . am I able to start an IRA for 2004 (knowing that I am not eligible for the company profit sharing plan in 2004) and start contributing (bit by bit) through the year (2004) rather than having to come up with the $3,000 (or higher applicable limit for 2004 - I'll look it up later) when I do my taxes? I think so, but wanted to run it by you.

[Appleby]

I just finished my taxes and decided to do the $3,000 to an IRA (b/c I am not eligible for company profit sharing plan for another year, etc.). Here's what may end up being a stupid question . . . am I able to start an IRA for 2004 (knowing that I am not eligible for the company profit sharing plan in 2004) and start contributing (bit by bit) through the year (2004) rather than having to come up with the $3,000 (or higher applicable limit for 2004 - I'll look it up later) when I do my taxes? I think so, but wanted to run it by you.

Yes. In fact, many IRA owners make their contributions “bit by bit”.

The limit for 2004 is $3,000 ($3,500 is you are at least age 52 by 12/31/2004)

[John G]

You also have a few days left (till April 15th) to fund your 2003 Roth if you qualify for that tax year. If you do, funding as much of 2003 as you can leaves the possiblity of contributing more than the $3,000.

Automatic monthly deposits from your checking account can be set up with almost all custodians. There are many benefits: (1) committs you to a systematic investment plan, (2) has a dollar cost averaging component, you buy more shares when the price is lower, and (3) often custodians will waive the initial amount or the annual fees for someone who makes automatic monthly contributions. There is one minor negative, if you have the funds to front load your contribution, your money is inside the shelter a little longer.

[jevd]

Appleby,

The limit for 2004 is $3,000 ($3,500 is you are at least age 52 by 12/31/2004)

I thought age 50

[Appleby]

You're are right. Typographical error .

Good looking out

[Guest mrilao]

Thank you for the replies! One follow-up - may I contribute to a Roth in addition to the $3,000 contribution I already made to a traditional IRA? Thanks again!

[ElGuapo]

Sorry, no, the $3,000 is a combined limit between Roths and traditionals, so you've already hit the limit--at least for yourself. If you have a spouse that's a different story.

[FundeK]

Can a married couple filing jointly, who make less than $150,000 each make a $3,000 contribution to a Roth?

[Lame Duck]

Yes. The contributory as well as spousal IRA rules apply to Roth IRAs as well as traditional IRAs.

[John G]

FundK: Married filing jointly completely qualify if adjusted gross income is below $150,000. But, there is a partial qualification between 150k and 160k <--- this is a really nit picky rule that has very little impact beyond making the IRS harder to explain... and as it is after midnight when I am writing this I got to say it sure seems goofy to me.

[Appleby]

The rule that applies if your income is between $150-$160K (the phase-out rule) is explained in this tutorial http://www.investopedia.com/university/ret...ra/rothira1.asp

[Guest mrilao]

Thank you so much!

[Lame Duck]

FundeK, I just reread your question and see tha I missed an important point. You specified $150,000 each and I missed that point. The requirement is for a total combined income of $150,000 or less. Sorry for the mistake.

[Appleby]

I think you read it right the first time Lame Duck. The each refers to each spouse contributing $3,000, when their combined income is $150,000

[FundeK]

Sorry for the confusion. I wanted to know if we each could contribute $3,000. We both make under $150,000 and unfortunately, when we combine them it is still under $150,000!! But I guess that is good for contributing to a Roth. Thanks for your responses!

[John G]

If you have two incomes that when combined give an adjusted gross income of less than $150,000 and you are filing a married filing a joint return, then each of you can contribute $3,000 (or more if your ages allow the additional the $500 make-provisions) to a Roth IRA.

Note, the maximum amount you can contribute is scheduled to increase in future years.

Also note, you must meet the income qualifications each year. The qualification in the first year does not carry over to future years. While there is no anticipated change in the income qualification rules... these could change in future years.

Conclusion: you do the math each year and apply the rules that apply for that year.