When did you start your Roth?

[fruitbowlk]

I started my Roth around 22 years old.

[Petunia 100]

I started saving for retirement at the age of 31. I wish I had started younger, but I didn't. When I was your age, I was in consumer debt hell. I married 17k of consumer debt, but only found that out after the wedding. It was my own fault, because I was too dumb to even ask. Between us, we made 26k per year, so it was a very significant amount of debt. It took almost a decade to claw out from under all of that.

I think you're in pretty good shape for your age. You have no debt other than your mortgage and it is small. You have some cash savings. You have some home equity. You're thinking about your retirement already.

I think you definately should get started, but you do have to balance retirement savings with other needs. Your house needs a remodel for structural reasons. That is far different than wanting a remodel. If 7.5% is what you can afford to do right now, then do 7.5%.

[MonkeyMama]

One more piece of advice. Save up the money but don't decide until you do your taxes. I was looking up retirement savers credit and is a little complex.

If I were you, I would run tax return with $2k/each to a ROTH IRA, when you do your 2013 taxes. You may be able to clear an additional $1000 - $1,500 tax refund if you do this strategy (savers credit). It's kind of complex and it is just going to depend on your final income tax numbers. Run the tax return with regular IRA contributions too, to be sure, but I think ROTH will be more profitable in your case.

You don't have to fund the IRAs until next April 15th, so you can file taxes early and get the credit/refund first. The end result is you only have to cough up $2500 - $3000 to be able to put $4,000 into your IRAs. The tax credit will fund the difference.

You will have to run your numbers - I do not have enough info to know if this is accurate. I am assuming about $30k income.

[MonkeyMama]

This is how the credit works:

http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Retirement-Savings-Contributions-Credit-(Saver%E2%80%99s-Credit)

But there are a few catches. For one, the total credit can't be more than your total income tax liability. That is why the ROTH worked better when I ran a quick calculation - you'd owe more taxes otherwise with the ROTH (so you get a bigger credit). Traditional IRA contributions will knock down AGI though, if you need lower income for the credit.

[klarose]

One more piece of advice. Save up the money but don't decide until you do your taxes. I was looking up retirement savers credit and is a little complex.

If I were you, I would run tax return with $2k/each to a ROTH IRA, when you do your 2013 taxes. You may be able to clear an additional $1000 - $1,500 tax refund if you do this strategy (savers credit). It's kind of complex and it is just going to depend on your final income tax numbers. Run the tax return with regular IRA contributions too, to be sure, but I think ROTH will be more profitable in your case.

You don't have to fund the IRAs until next April 15th, so you can file taxes early and get the credit/refund first. The end result is you only have to cough up $2500 - $3000 to be able to put $4,000 into your IRAs. The tax credit will fund the difference.

You will have to run your numbers - I do not have enough info to know if this is accurate. I am assuming about $30k income.

I didn't know about this tax credit! I just looked it up and it looks like we'd get 50% of the first $2,000 so $1,000. Does that mean we'd get back an extra $1,000 on our tax refund?

I won't be able to fund the Roth until March probably... By then I'm guessing I'd only have $1,000 unless of course I do my taxes early, and put the refund towards it as well.

I can put it on my taxes, if I do them in Feb... Even if I don't actually put the money in until March?

What happens if I can't contribute the amount I listed on my taxes before April 15th?

[klarose]

I thought when you get tax credits, that is just an amount that is subtracted from your income. So you'd just have to pay less taxes.. Whatever your rate is. I didn't think you actually got the entire credit back as cash?

Taxes have always confused the heck out of me.

I think I'm interchanging tax deductions and tax credits though.

[MonkeyMama]

I think I'm interchanging tax deductions and tax credits though.

Correct. Deductions are different than credits.

[klarose]

It is a "nonrefundable" credit. So as I understand, we may not get back barely anything because we will already have other credits and deductions, and we already be getting a refund.

But I'm not 100% how it works. I'm trying to find a tax calculator to run numbers.

[MonkeyMama]

I can put it on my taxes, if I do them in Feb... Even if I don't actually put the money in until March?

What happens if I can't contribute the amount I listed on my taxes before April 15th?

Yes, you can file your taxes before you fund the IRAs.

If you don't contribute in time then you lose the credit. I probably wouldn't do this if I had "no money". But if your EF can cover it while you wait for refund or in case there is any snafu... For the most part, these type refunds are pretty quick.

[MonkeyMama]

It is a "nonrefundable" credit. So as I understand, we may not get back barely anything because we will already have other credits and deductions, and we already be getting a refund.

But I'm not 100% how it works. I'm trying to find a tax calculator to run numbers.

This is why I think it's best to just run the numbers when you do your taxes. This is a hard credit to estimate.

What was line 61 on your 1040 form last year? That is the number that matters - your total tax for the year. IT's non-refundable so it can't be more than your "tax".

It can be "Refunded" - it just can't reduce your total taxes to "below zero." Other credits just add more layers of complexity, so it is possible you won't be able to get much out of this credit. If not this year, just keep an eye on it in the future.

[klarose]

I know I've paid a lot of taxes last year. In the thousands. But I'm not sure how much will already be taken off because of other credits. So I guess I'll just save for now and run the numbers in Feb. That would be AWESOME if we could get back an extra $1,000 or even $2,000. I'd for sure put that towards the Roth.

Thanks for the head's up! I would have never known about this credit!

[klarose]

I suppose to get two $1,000 credits we would each have to open a Roth IRA.

[rennigade]

I started when I was 23...wife started when she was 22. We've been maxing each year.

I wish I would have started when I was working in high school...Ive always lived below my means and never had a problem saving. At least Ill have the knowledge now to pass onto my kid whenever we decide to have one. The earlier you start the better.

[MonkeyMama]

I suppose to get two $1,000 credits we would each have to open a Roth IRA.

You can just put $4,000 into one ROTH, to get the same benefit. $4,000 is just the max you get credit for, as a married filer. (I thought maybe it was $2k/each, but I just double checked. $4k into one ROTH is also okay).

[QuarterMillionMan]

I started at age 40, currently age 47. I had to max out my contributions each year due to my late start. How I wished I had started earlier but I guess it is better late than never. My total balance should be about $35,500 (7 years x approx. $5000 per year (recently increased to $5500)= $35,500) but due to some risky investment choices my balance is about $26,000. My Roth IRA portfolio is mainly in gold and I bought it during its highest level.