Today is October 15th which is exactly 6 months from April 15th. Let’s not dwell on income taxes today, but instead let’s think about your Roth IRA. This little account is an incredible opportunity that you have for your money future. Every client I meet with I stress the importance of a Roth IRA as it can grow before, during and after your retirement.
First, a few rules:
Income Rules — In order to deposit money in an IRA account, you need to have earned income. What’s that? It means you need some type of a paycheck from a job. If you only receive income from Social Security, Investments or IRA withdrawals you are out of luck. If you make too much money you are also out of luck. For 2013 if you are single you have to make less than $112,000 and if you are married both of you have to make less than $178,000 to make the full contribution.
Contribution Rules – If you qualify based on your income you can contribute up to $5,500. If you are married and you only have one income, that’s OK as you can make a spousal contribution as well.
Deadline – The IRS gives you until April 15th of the following year to make your contribution. That means you can fund your Roth IRA anytime in 2013 through April 15th 2014.
Looking at the numbers, all you need to do is save $916 every month for the next 6 months and you can max out your contribution. And now all of you are rolling your eyes and saying – Sure Joel that’s easy to do. So, don’t think about the limit, think about what you can do. If you have never opened and funded a Roth IRA pledge right now to do one for 2013. Find $25, $50 or $100 per month and you can get started.
If you are struggling with paying off debt, I still think you should find some amount of cash to open and fund an account with for 2013. This may not be popular advice, but dream big and assume that someday you will earn too much money to fund a Roth IRA. The future you will still be tracking your Roth IRA long after you pay off that final debt.
I will share more information on Roth IRAs next month on the 15th as we count down to Roth IRA Contribution Day next April 15th.
Keep making your money feel better.