This is the time of year when we receive reminders from our bank or brokerage house about funding an IRA. Most folks ignore the message saying they just don't have the money.
One of the best gifts Congress has given the American public is the Roth IRA.
It allows us to contribute after-tax dollars (money on which we have already paid taxes) to an account that will grow tax-deferred (does not issue a 1099 annually) and have that money grow over time and come out TAX-FREE.
Once we turn 59 1/2 we may take distributions from the Roth IRA paying NO taxes on all those years of growth. And when we die, our heirs pay no taxes on that money either. That is one good deal!
All or nothing mentality comes into play when folks think they do not have the $5000 (or $6000 if you are over 50) to contribute to the account. How about contributing $500 or $1200 or any amount less than the maximum? If you can't contribute the maximum, contribute some amount, any amount!
Right now you may contribute for 2011 up to April 17th; for 2012 any time up until April 15 of 2013. But a smart and painless method would be to have a set amount deducted monthly from your checking account throughout the year and deposited directly into your Roth.
Congress doesn't give us many gifts. Please take advantage of this one.
Be aware, there are income limits (if your income is over a certain level) for Roth contributions so ask your tax advisor the amount you are eligible to contribute.