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Investing for Retirement with a Roth IRA

Radio Transcript, 2 minutes 25 seconds, for use during week of Feb. 18.

Description:  Penny and Susan discuss setting up an Individual Retirement Account

Announcer: Invest Wisely comes to you from Iowa State University Extension through a grant from the Investor Protection trust, providing investor education on the web at: investorprotection.org.

Susan: We talked recently about Individual Retirement Accounts.  I’m currently about  fifteen years from retirement.  If I started an IRA this year, what should I think about?

Penny: There are a couple of things you should know.  First, there are limits on your yearly contribution to an IRA.  The maximum contribution for the 2007 tax year is four thousand dollars--five thousand if you’re over fifty.  For the 2008 tax year, the maximum contribution is five thousand dollars--or six thousand if you’re over fifty.

Susan: Since it’s already 2008, isn’t it too late to make a contribution for 2007?

Penny: You can actually make a contribution for the previous tax year until April 15th.

Susan: So now is the right time to be thinking about setting up an IRA.

Penny: Definitely. 

Susan: What do I have to do to setup an IRA?

Penny: Banks, credit unions, savings and loans, insurance companies, mutual fund companies and investment brokers can all help you setup an Individual Retirement Account.  When deciding where to go and who to talk to, you’ll want to consider the risks and fees associated with the specific IRA you’re considering.

Susan: We’ve talked about traditional and Roth IRAs previously.  How do I know which type is right for me?

Penny: A Roth IRA is usually a better choice if you’re not eligible to deduct your contributions to a traditional IRA but remember that both IRA contributions are always made with after-tax money. And before you decide on either a traditional or a Roth IRA, think about increasing your contributions to your 401(k) or other salary reduction plan if your contribution will be matched by your employer.

Susan: Thank you, Penny.  This has been very helpful.

Penny: You’re welcome.  And remember, for more information visit the ISU Extension website at extension.iastate.edu and look for ‘Invest Wisely.’

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Updated February 18, 2008