It will actually be a few days until I have maxed out my IRA for the 2013 year since I have to wait for my deposit to clear. The money is on the way though so I’m counting the IRA as maxed out now. I also made the maximum IRA contributions for 2012 with the bulk of those contributions being made this year since you have until April 15th of the following year to make IRA contributions for the current year. This is the first time I’ve ever maxed out my IRA two years in a row. I’ve actually only made the maximum IRA contribution once before and that was when the maximum was only $2,000. The max contribution now is $5500 for taxpayers under 50. I wish I would have been maxing out my IRA in years past, but most years I didn’t have the income to do that. It is better late than never.
I actually have both a traditional IRA and a Roth IRA. Even though I have two IRAs the maximum contribution is still only $5500. I put the bulk of my contribution into the traditional IRA. My theory is that it is better to efile and take the tax break now than gamble on it still being around later.
Now that I have maxed out my IRA I am thinking about opening a solo 401k to put away even more money. Before I do that though I am going to build up my cash savings. I would like to have more of my savings held outside of retirement accounts so that I can access it quickly and without penalty if needed.
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If your numbers are accurate on the blog your annual income is something like 12-15K I saw June income was under 1K for example. With that in mind you would do much better with a ROTH since (hopefully) you will be earning more than that in the future, and your current effective tax rate is as low as it gets.
My income has some big fluctuations this year. I should make over 3k this month. I’m predicting I’ll make a little over 20k this year. That would still put in the lowest tax bracket though.
Did any of your employers offer a 401k plan this year? I would max that out if available.
I think if you are going solo, word on the street is that a solo 401K plan is more cumbersome than say a SEP IRA for example..
I didn’t have access to a 401k since I’m a seasonal/temporary employee. I don’t think a SEP IRA would benefit me since I think it shares contribution limits with the other IRAs.
Maxing out any retirement account is a great achievement, especially when you still have a few months left in the year. I would look at converting it to a Roth IRA if possible.
I don’t plan to convert it to a Roth. I’m thinking my tax rate when I retire will still be low.
I’m with Matt- even if you count the political risk, you should still bias your position to Roth. A nice feature of the Roth? You can pull out the contributions at any point (especially if it looks like a national sales tax or other Roth killer is coming).
The contributions are done for this year. Maybe next year I’ll put my money in the Roth.
What Matt said. Once your income is significantly higher, you can switch to traditional, but I recommend Roth because your rates will most likely be higher than they are right now.
That being said, well done, sir! I haven’t done this in a while either, as we are on a pretty tights budget. Maxing out the IRA is a great accomplishment.
The traditional allows me to pay zero taxes right now which I like. I will study the two options before I invest next year.