2. Convert Your IRA to a Roth
That brings me to the adults reading and a recent article that appeared in the New York Times. Converting a traditional IRA to a Roth IRA might be a tax strategy that could save you in the future, especially if you do it now, while stocks are essentially on sale.
Doing this conversion will mean that you pay taxes now, but once it’s in a Roth, you don’t have to pay taxes on future withdrawals. The more you manage to pay in there, the greater your benefit will be down the road.
Considering that we’re in one of the most beat-up markets in decades, there’s very good potential there.
3. Pump Up Your 401(k) and IRAs
If you’re not already, think about maximizing your 401(k) contributions. Times are tight, but every little bit you manage to contribute could go a long way down the road. Valuations are low, and the potential for a recovery at some point is high. It’s in your best interest to continue saving for your Golden Years now more than ever.
Be aware that there are annual contribution limits for whatever type of retirement account you choose. Because of the tax advantages IRAs offer, it’s often best to make the maximum annual contribution.
In 2008, the limit for those age 49 and under is $5,000, while those 50 and above are $6,000. After this year, the contribution limit will rise in $500 increments, depending on the level of inflation. If you’re contributing to both types of IRAs, your total contributions between the funds can’t exceed the limit.
For 401(k)s, the contribution limit is $15,500 for those 49 and younger. For those 50 and older, the limit is $15,500, plus an additional $5,000 catch-up contribution. You plan administrator should have written information about your specific plan explaining any other limitations and regulations.