IRAs

If you work for a company that doesn’t offer a retirement savings plan, or
if you’ve exhausted contributing to your company’s plan, consider an individual retirement account (IRA). Anyone with employment income (or who
receives alimony) may contribute up to $5,000 each year to an IRA (or the
amount of your employment or alimony income if it’s less than $5,000 in a
year). If you’re a nonworking spouse, you’re eligible to put up to $5,000 per
year into a spousal IRA. Those age 50 and older can put away up to $6,000 per
year (effective in 2011).
Your contributions to an IRA may or may not be tax-deductible. For tax year
2011, if you’re single and your adjusted gross income is $56,000 or less for the
year, you can deduct your full IRA contribution. If you’re married and you file
your taxes jointly, you’re entitled to a full IRA deduction if your AGI is $90,000
per year or less.
If you can’t deduct your contribution to a standard IRA account, consider
making a contribution to a nondeductible IRA account called the Roth IRA.
Single taxpayers with an AGI less than $107,000 and joint filers with an AGI less
than $169,000 can contribute up to $5,000 per year to a Roth IRA. Those age 50
and older can contribute $6,000. Although the contribution isn’t deductible,
earnings inside the account are shielded from taxes, and, unlike a standard
IRA, qualified withdrawals from the account are free from income tax.