ToTransferOrNot wrote:All of that said, I plugged $5k into a Roth this year, just so I had some money to play around with re: investing, hoping to "learn the ropes" before I actually have to do this with a significant amount of cash. Had I done it earlier, I would have made a ton of money, because I would have shorted the hell out of the market right before the whole debt ceiling debacle happened. But I could just as easily have been on the other side.
Putting money into a Roth is buy far the smartest thing you can do during your stub year and SA years (obviously only if you're lucky enough to snag a position that'll net you north of $20k or so for the summer). You'll never be eligible to contribute once you're in your first full year of biglawl due to income caps, and the Roth IRA is by far the sweetest gift the government ever gave to normal people who know how to save. With income tax rates headed nowhere but up for the foreseeable future, stash away as much as you can in those things.
Too bad you can't short anything or buy puts in IRAs of any sort.
I have no idea whether this is true, but it could be a way around the income caps:http://www.ehow.com/info_7759822_roth-ira-income-cap.html#ixzz1V8pJI0Am
• The Roth IRA income cap(s) are adjusted by the IRS, usually every year. You can find current levels at irs.gov. For 2011, if you were single or head of household, the phase-out range was $107,000 to $122,000. For taxpayers who were married filing jointly, the range was $169,000 to $179,000. If you were married but filing separately, the phase-out starts at zero and the income cap topped out if your income reached $10,000.
• If your adjusted gross income (AGI) falls in the phase-out range, it's not hard to figure out how much you can contribute to your Roth IRA. First, subtract the lower limit from your AGI. Divide this figure by the amount of the phase-out range to find the percentage of the contribution limit that has phased out. Then reduce your contribution limit by this percentage. Suppose you are single with an AGI of $114,500. First, you can subtract $107,000, leaving $7,500. The phase-out here is $15,000 (or the result of $122,000 - $107,000 = $15,000). $15,000 divided by $7,500 is 50 percent, so you must reduce your contribution limit by 50 percent. If your nebular limit is $5,000, you can still contribute $2,500.
• A rule that went into effect in 2010 may help investors who want to contribute to a Roth IRA but make too much. Before 2010, you could not convert a traditional IRA to a Roth IRA if your income exceeded $100,000--but that income cap is no longer in effect. Therefore, there is nothing to prevent you from contributing to a nondeductible traditional IRA and immediately rolling the assets over to a Roth IRA, thereby skirting the IRS's income limits.