It is time to fund Roth IRAs. A Roth IRA is an awesome tax free investment vehicle. Anything that is tax free should be considered.
One can contribute the lower of their earned income or $5,500 in 2014 and 2015 and an additional $1,000 each if age 50 or older.
If you haven't done it for 2014, you have up to April 15, 2015 to do it. I also recommend doing the 2015 contribution as soon as possible. Why wait?
If one's income is below a certain level, he/she can fund a Roth IRA. If it is at or above the level, the amount one can contribute gets reduced, ultimately to zero. The phase out rule.
The income level and phase out ranges are as follows:
- Married Filing Jointly: AGI $183,000-$193,000
- Head of Household or Single: AGI $116,000-$131,000
- Married Filing Jointly: AGI $181,000-$191,000
- Head of Household or Single: AGI $114,000-$129,000
- 2015 and 2014
- Married Filing Separately: AGI $0-$10,000
If one's income exceeds the above, there is still a way to fund a Roth IRA.
Consider making a traditional non-deductible IRA contribution and converting it to a Roth shortly thereafter. This strategy may not make sense if you already have funds in a traditional IRA, SEP, SAR-SEP or Simple IRA. The rules treat a portion of the converted amount as coming from all IRA accounts and therefore some of the conversion could be taxable.
Like the regular contribution to a Roth IRA, If you haven't done the conversion technique for 2014, you have up to April 15, 2015 to do it. I also recommend doing the 2015 contribution and conversion as soon as possible. Why wait?
Also, consider funding a Roth IRA for your children or grandchildren, subject to the same limits above. If they don't have earned income, consider having them perform household duties and pay them by funding the Roth IRA. Unless they are using their own funds or you are paying them for household services with the contribution, the contribution will be considered a gift.
Again, If you haven't done it for them for 2014, you have up to April 15, 2015 to do it. I also recommend doing the 2015 contribution as soon as possible. Why wait?