Even if you've already filed your taxes you can still make a contribution for 2007 to your Roth IRA at any time before your deadline to file (not counting extensions). The reason is that you make these contributions on an after-tax basis. So, there would be no need to file again unless your Adjusted Gross Income is below $26,000 (single) or $52,000 (MFJ). In that case you may qualify for a savers credit on your return and it would probably benefit you to file an amended return.
So, there's no need to think "Oh well. Maybe next year." If you have the money sitting somewhere to make the contribution, talk to your tax professional about the guidelines for Roth IRA contributions.
I am a big fan of Roth IRAs and here's why:
Let's say you're 40 years old and plan to retire at age 65. If you contribute the maximum of $4,000 for 2007 and pay taxes on it now, assuming a modest 6% rate of return, you will have $17,167 in tax-free money to use for retirement at age 65
Now, let's say you're 50 or older and have 15 years left till you retire. Your maximum contribution is $5,000 for 2007. In 15 years, assuming that same 6% rate of return, you will have $11,982 in tax-free money to do with as you please.
People often tell me "But I'll be in a lower tax bracket when I retire". Really! Here's a post from someone who describes "the whole 401(k) thing – apart from the “free money” from your employer "– as "a perfect way to lose money without even trying."
There are only two reasons you'd be in a lower tax bracket when you retire.
- You draw a significant portion of your retirement income from a tax-free account like a Roth IRA.
- You didn't quite reach your goals for retirement.
