Don’t go to sleep!
The clock is ticking.
Once you retire, you cannot contribute to a ROTH because you have no earned income.
In my case, I realised that I could still contibute $5500 FOR 2014 TAX YEAR BEFORE APRIL 15 2015.
I promise this could be worth your while.
THE GROWTH IS TAX FREE!!
Now I have your attention, don’t I?
In 2014, if your household income is LESS than $129,000 then you can contribute $5,500 per person directly to a ROTH IRA.
What if you make $130,000 or more?
Not to worry.
Do a backdoor or “conversion” ROTH.
Open a traditional IRA then “convert” the funds into a ROTH.
I use American Century because it is the company my late “Papi” used and they have been so helpful in getting started. They have the heart of a teacher.
Most places require a minimum of $1,000 to start a ROTH IRA. At Fidelity, you can start with $200 with monthly auto deductions for about a year.
I socked away some money in a mutual fund a few years ago.
I also created a small IRA then and did 2 backdoor ROTH CONVERSIONS-one for 2012 and another for 2013.
For 2014, I realised that I had already paid most of the taxes on the mutual funds and would pay hundreds on capital gains （15-20%） instead of thousands as regular income tax （25-40%） from the IRA in taxes.
At TradeKing and TDAmeritrade, there is no minimum-a great way to get your foot in the door. You can also rollover from an old 401k to get started. Make sure you do.a DIRECT rollover.
Does it make sense to pay the tax to get started in a conversion ROTH?
Let’s be all nerdified and compare the numbers:
*You are in the 30% tax bracket.
*You will average 12% return over 30 years in the stock market.
To fund $5500 you will need more than that to pay the tax. $7900 will get you started. Congratulations, $2400 just went to the government.
But not to worry. You will make up ground quickly-less than 3 years.
Remember that the tax year in the US is April 15-April 15.
If you let that ROTH grow it makes tax free $ for you.
What would it make if you did a conversion every year?