Permalink Submitted by Alan Spross on Tue, 2008-03-11 19:18
You only pay taxes on the interest, just as you would if you left the CDs in a taxable account. You have already paid taxes on the money use used to open the CDs.
If you use a bank as your IRA custodian, you will have to wait until the CDs expire to avoid an early withdrawal penalty to cash them out. The bank cannot simply transfer the CDs into an IRA. They must be cashed out, and then you contribute the amount you choose up the limit allowed to the Roth IRA. There is no tax deduction for the Roth contribution.
What this would do is stop the CD interest from being taxed once you purchase the new CD in the Roth IRA. Those earning will grow in your Roth and in retirement all Roth IRA distributions will be tax free.
Permalink Submitted by william kafouse on Sat, 2008-03-22 02:22
thank you for answering our roth question. one last one: my wife is working and has a roth ira. our income gross is about 35,000.how much can we both contribute this year? thanks again.
Permalink Submitted by Alan Spross on Sat, 2008-03-22 02:40
At this time of year you can contribute for either 2007 or 2008. Your contribution limits for 2007 to your Roth are 4,000 each and for 2008 you can contribute 5,000 each.
For each of you that has reached age 50 in the respective year above, you can add another $1,000 as a catch up contribution.
Be sure you clearly specify the year the contribution is for and check to make sure the IRA custodian assigns it to the correct year.
Permalink Submitted by Alan Spross on Tue, 2008-03-11 19:18
You only pay taxes on the interest, just as you would if you left the CDs in a taxable account. You have already paid taxes on the money use used to open the CDs.
If you use a bank as your IRA custodian, you will have to wait until the CDs expire to avoid an early withdrawal penalty to cash them out. The bank cannot simply transfer the CDs into an IRA. They must be cashed out, and then you contribute the amount you choose up the limit allowed to the Roth IRA. There is no tax deduction for the Roth contribution.
What this would do is stop the CD interest from being taxed once you purchase the new CD in the Roth IRA. Those earning will grow in your Roth and in retirement all Roth IRA distributions will be tax free.
Permalink Submitted by william kafouse on Sat, 2008-03-22 02:22
thank you for answering our roth question. one last one: my wife is working and has a roth ira. our income gross is about 35,000.how much can we both contribute this year? thanks again.
Permalink Submitted by Alan Spross on Sat, 2008-03-22 02:40
At this time of year you can contribute for either 2007 or 2008. Your contribution limits for 2007 to your Roth are 4,000 each and for 2008 you can contribute 5,000 each.
For each of you that has reached age 50 in the respective year above, you can add another $1,000 as a catch up contribution.
Be sure you clearly specify the year the contribution is for and check to make sure the IRA custodian assigns it to the correct year.