Tax Update Blog: Permalink

« Previous · Tax Update Blog Home · Next »

Roth IRA for 2008?

April 09, 2009

While a traditional IRA may be a good deal for 2008, a Roth IRA may turn out better in the long run. Traditional IRAs are (sometimes) deductible when they you put money in, but they are taxable when you take money out. Roth IRAs, in contrast, don't give you a deduction, but the earnings are tax free forever. That means if your rates are higher when you need the money than they are now, the Roth IRA could well be a better deal.

And who thinks rates are likely to come down, the way the government is spending?

The Roth IRA isn't available to everyone, but it is available to taxpayers at higher income levels than traditional IRAs often are. Your maximum contribution is the lesser of your earned income or $5,000 ($6,000 if you are 50 or older at the end of 2008). The ability to make a Roth contribution is eliminated at higher income levels according to this table:

Source: IRS.gov