|
 |
The Basics of IRAs... Page
2
continued
Qualified Custodians:
- Banks, Credit Unions, Savings and Loans
- Mutual Fund companies
- Insurance companies
- Brokerage Firms - self directed accounts
that allow you to pick among a number of investments.
Contributions
Anyone under age 70 1/2 who earns employment income or is married to someone who does can
contribute to an IRA. The annual limit on a contribution is $2,000 or 100% earned income,
whichever is less. So if you earned $1,000 for the year, your maximum contribution would
also be $1,000. Contributions can be made as lump-sum payments or as periodic payments
throughout the year (such as dollar-cost averaging).
As long as you have earned income, there is no minimum age for contributing to an IRA. And
with the new Roth IRA, contributions are allowed after age 70 1/2 provided you're still
employed and earning income.
What if I contribute more than my earned income or just accidentally go over the limit?
Any contributions over $2,000 are subject to a 6% penalty. You're penalized each year
until the excess is either taken out of your IRA or absorbed by a future contribution -- a
normal contribution minus the excess. Example: If you had an excess of $500 one year,
you'd only be able to contribute $1500 the following year.
The deadline for making an IRA contribution is April 15 for that current tax year. 1999
contributions, for example, are accepted from Jan 1, 1999 to April 15, 2000 by your IRA
custodian. By making your contribution sooner rather than later, your money will be given
more time to grow in a tax-deferred (tax-free for Roth IRAs) environment.
MORE »
|
