matt1215 0 #1 January 13, 2007 I have some questions for you IRA-savvy types. I've never established an IRA account, but I have about $2.8k sitting in a 12-month CD account. It matures next month and I'm still deciding what to do with it. If I understand the process correctly, I can put $4k away for retirement, then deduct that same $4k from taxable income as stated on my 1040. My questions are: 1. Can I put this $$ into any type of investment account, including simply letting the bank renew it as a 12 mo CD, then call it an IRA? 2. If I added another $1.2k now, would it be kosher to take the full $4k deduction on my 06 taxes? I about broke even with FITW, deducting $4k would give me a really nice tax return. Quote Share this post Link to post Share on other sites Bolas 5 #2 January 13, 2007 You want a Roth IRA. No benefits now but it is tax free $$$ when you cash it out after retirement. Stupidity if left untreated is self-correcting If ya can't be good, look good, if that fails, make 'em laugh. Quote Share this post Link to post Share on other sites NWFlyer 2 #3 January 13, 2007 QuoteMy questions are: 1. Can I put this $$ into any type of investment account, including simply letting the bank renew it as a 12 mo CD, then call it an IRA? No. An IRA (Roth or Traditional) is a specific type of account. Once you put it in there, you can only take it out for very specific reasons without penalty (before retirement) and no matter when you take it out you will then have to pay taxes on it. Quote 2. If I added another $1.2k now, would it be kosher to take the full $4k deduction on my 06 taxes? As stated above, you'd have to move the CD money into an actual IRA, plus the additional money. And yes, IIRC it's totally kosher to put more money in now - I believe you can deposit up until the IRS filing deadline of April 15 2007 and count it on your 2006 taxes. I'm not an accountant or tax specialist, so check this before taking my word for it ... but I've done that before - put money in an IRA the year after for a deduction for the previous year."There is only one basic human right, the right to do as you damn well please. And with it comes the only basic human duty, the duty to take the consequences." -P.J. O'Rourke Quote Share this post Link to post Share on other sites matt1215 0 #4 January 13, 2007 Definitely an option. I'm just trying to figure out if there's a way to get that $4k deduction on my 06 taxes. I seem to remember hearing that one can take the tax deduction on the previous year's 1040 for $$ invested between 1 Jan and 15 Apr. Quote Share this post Link to post Share on other sites matt1215 0 #5 January 13, 2007 Sweet!!! Quote Share this post Link to post Share on other sites JohnnyD 0 #6 January 13, 2007 QuoteQuoteMy questions are: 1. Can I put this $$ into any type of investment account, including simply letting the bank renew it as a 12 mo CD, then call it an IRA? No. An IRA (Roth or Traditional) is a specific type of account. Once you put it in there, you can only take it out for very specific reasons without penalty (before retirement) and no matter when you take it out you will then have to pay taxes on it. Quote 2. If I added another $1.2k now, would it be kosher to take the full $4k deduction on my 06 taxes? As stated above, you'd have to move the CD money into an actual IRA, plus the additional money. And yes, IIRC it's totally kosher to put more money in now - I believe you can deposit up until the IRS filing deadline of April 15 2007 and count it on your 2006 taxes. I'm not an accountant or tax specialist, so check this before taking my word for it ... but I've done that before - put money in an IRA the year after for a deduction for the previous year. 1. Kind of. A Roth is an after tax contribution. Qualified withdrawls are tax free. Traditional IRA is a pre tax contribution. There is an immediate benefit, but all withdrawls are considered taxable income. 2. Yes, and here is the thing: The younger you are, the more beneficial it is to contribute to a Roth. The maximim contribution for 2006 is $4k. Whatever amount that grows into will be a tax free return. In theory, your taxable income will be much lower in your 20s than your 40s. If you can afford to contribute to a Roth in your 20s, the tax burden of doing so will be low and the returns will all be tax free. If you are in your 20s or 30s, its a no-brainer (specific tax implications not withstanding). At least that is what I heard once around the campfire. Quote Share this post Link to post Share on other sites Join the conversation You can post now and register later. If you have an account, sign in now to post with your account. Note: Your post will require moderator approval before it will be visible. 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Bolas 5 #2 January 13, 2007 You want a Roth IRA. No benefits now but it is tax free $$$ when you cash it out after retirement. Stupidity if left untreated is self-correcting If ya can't be good, look good, if that fails, make 'em laugh. Quote Share this post Link to post Share on other sites
NWFlyer 2 #3 January 13, 2007 QuoteMy questions are: 1. Can I put this $$ into any type of investment account, including simply letting the bank renew it as a 12 mo CD, then call it an IRA? No. An IRA (Roth or Traditional) is a specific type of account. Once you put it in there, you can only take it out for very specific reasons without penalty (before retirement) and no matter when you take it out you will then have to pay taxes on it. Quote 2. If I added another $1.2k now, would it be kosher to take the full $4k deduction on my 06 taxes? As stated above, you'd have to move the CD money into an actual IRA, plus the additional money. And yes, IIRC it's totally kosher to put more money in now - I believe you can deposit up until the IRS filing deadline of April 15 2007 and count it on your 2006 taxes. I'm not an accountant or tax specialist, so check this before taking my word for it ... but I've done that before - put money in an IRA the year after for a deduction for the previous year."There is only one basic human right, the right to do as you damn well please. And with it comes the only basic human duty, the duty to take the consequences." -P.J. O'Rourke Quote Share this post Link to post Share on other sites
matt1215 0 #4 January 13, 2007 Definitely an option. I'm just trying to figure out if there's a way to get that $4k deduction on my 06 taxes. I seem to remember hearing that one can take the tax deduction on the previous year's 1040 for $$ invested between 1 Jan and 15 Apr. Quote Share this post Link to post Share on other sites
JohnnyD 0 #6 January 13, 2007 QuoteQuoteMy questions are: 1. Can I put this $$ into any type of investment account, including simply letting the bank renew it as a 12 mo CD, then call it an IRA? No. An IRA (Roth or Traditional) is a specific type of account. Once you put it in there, you can only take it out for very specific reasons without penalty (before retirement) and no matter when you take it out you will then have to pay taxes on it. Quote 2. If I added another $1.2k now, would it be kosher to take the full $4k deduction on my 06 taxes? As stated above, you'd have to move the CD money into an actual IRA, plus the additional money. And yes, IIRC it's totally kosher to put more money in now - I believe you can deposit up until the IRS filing deadline of April 15 2007 and count it on your 2006 taxes. I'm not an accountant or tax specialist, so check this before taking my word for it ... but I've done that before - put money in an IRA the year after for a deduction for the previous year. 1. Kind of. A Roth is an after tax contribution. Qualified withdrawls are tax free. Traditional IRA is a pre tax contribution. There is an immediate benefit, but all withdrawls are considered taxable income. 2. Yes, and here is the thing: The younger you are, the more beneficial it is to contribute to a Roth. The maximim contribution for 2006 is $4k. Whatever amount that grows into will be a tax free return. In theory, your taxable income will be much lower in your 20s than your 40s. If you can afford to contribute to a Roth in your 20s, the tax burden of doing so will be low and the returns will all be tax free. If you are in your 20s or 30s, its a no-brainer (specific tax implications not withstanding). At least that is what I heard once around the campfire. Quote Share this post Link to post Share on other sites
