Maybe you’d prefer a Roth IRA. A Roth IRA has the same contribution limits as a Traditional IRA, but you don’t have to be under age 70½ to contribute to it. However, you can be restricted from contributing to a Roth IRA at all if you are single and make over $116,000 in a year, or are married, filing jointly, with joint income over $169,000 per year. Roth IRA contributions are not tax deductible. The appeal of a Roth IRA, though, is that, not only are the earnings on your contributions tax-deferred, they may also be tax-free if you wait to take them out until you’ve had a Roth IRA open for at least five years, and you reach age 59½, become disabled, die or qualify as a first-time homebuyer.
The latest date for a Roth IRA contribution is identical to the deadline for Traditional IRA contributions.
If you are self-employed, you can take advantage of an extra opportunity to save for retirement by opening and contributing to an employer-sponsored plan for yourself and any employees. Simplified employee pension (SEP) plans, savings incentive match plan for employees (SIMPLE), and Individual(k) plans (a type of 401(k) plan) are three employer-sponsored retirement plans that are easy for small employers to set up and maintain. In addition to the benefits of saving for retirement on a tax-deferred basis, some small employers who establish new retirement plans (effective beginning January 1, 2002) are eligible for a business tax credit of up to 50 percent of the plan start-up costs for a period of up to three years. A $500 maximum credit limit applies for each of the three years. Seek financial advice to determine which plan might be right for your business, and whether you should file for the start-up plan tax credit. The IRS Publication 560, Retirement Plans for Small Business, is a good source of basic information.