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Contributing to a Roth is always a good idea

Posted by Jill Boynton  March 26, 2009 10:00 AM

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I am considering taking an early retirement package which would have me retired by July. Can and should I contribute to my Roth? Can I contribute the maximum with only half a year of work? What type of mutual fund would be the best to fund in this climate?

Contributing as much as you can to your retirement plans always makes sense, and retiring mid-year won't necessarily affect that strategy. As long as you have earnings in 2009 you can contribute the lesser of $5,000 ($6,000 if you are age 50 or older) or an amount equal to your earnings. You can even make the contribution after you retire in July, as long as it is made before you file your 2009 income taxes next year.

Roth IRA contributions have a few other restrictions: the amount you can contribute begins to phase out if your income is above $166,000 for joint filer taxpayers or $105,000 for single taxpayers. Contributions are not allowed at all if your income exceeds $176,000 for joint filers and $120,000 for single filers.

Roth IRAs are a wonderful savings vehicle. As long as you are age 59 1/2 or older and your first withdrawal is at least 5 years after your first contribution, all of the interest, dividends and capital gains accrued in the account, in addition to your contributions, come out tax-free. In addition there is no required minimum distribution after age 70 as there is for traditional IRA owners.

If you are able to, you should consider also making the maximum contribution to your company retirement plan before you retire too.

As far as choosing a mutual fund, that is difficult to advise without knowing the rest of your portfolio. Your contributions should be invested in alignment with your other retirement savings, in a diversified portfolio of stocks, bonds and cash. Consult a financial advisor if your portfolio needs a check-up or rebalance before retirement.

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.

About the contributors

D. Abraham Ringer is a CERTIFIED FINANCIAL PLANNER practitioner and a Financial Adviser with Morgan Stanley Global Wealth Management in Boston. He is registered in MA, NH, NY and several other states to which his articles are directed. For more information please visit
Financial Planning Association™ of Massachusetts has 900 members who specialize in the financial planning process. Many of its members engage in philanthropic pro bono work in their communities, recommend legislation, elevate public awareness, promote financial literacy, and advocate for sound economic and tax policies.
Odysseas Papadimitriou is the founder of, a credit card and gift card marketplace, and, a personal finance site. He has more than 13 years of experience in the personal finance industry, and previously served as senior director at Capital One.

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