What Can You Contribute To A Roth Ira?

Given the tax-free distributions from Roth IRAs, one is tempted to stuff every penny possible into one. Alas, the IRS isn?t particularly keen on such an approach.

The Roth IRA is a very effective tool in a life long financial planning process. It is structured in a manner that allows it to accumulate a great deal of investment earnings during your lifetime and then allows you to withdraw these earnings after retirement without having them subject to income tax. The money contributed to the plan is taxed before it is deposited and so it is not subject to additional tax.

The only drawback to this is the cap put on contributions. Roth IRA caps are set at $4000 per year maximum for people under the age of 50. People above the age of 50 can contribute an additional $1000 per year for a total of $5000. These figures will increase to $5000 and $6000 per year in 2008. After that they will increase yearly in $500 dollar increments based on the yearly inflation rate.

These caps on contributions are really only a problem for people who receive a large lump sum amount of cash in a given year and desire to put a large portion of it into a tax sheltered account for investment purposes. This is very likely the reason for the cap in the first place. The Individual Retirement Account was not intended for that kind of investment tax shelter. It was designed to provide supplemental income for life after retirement.

A few calculations illustrate this point. The maximum contribution in 2008 of $5000 equals about $416 per month or a little over $100 per week. When seen this way, the figure does not seem overly restrictive to wage earners who are just beginning their careers. Assuming that a person opens a Roth IRA at age 21 and makes the maximum contribution each year until age 65, there will be a tidy sum invested. Of course, the account owner can never go over the qualifying income level and not make any early withdrawals. Also, it would assume that the inflation rate does not rise which is highly unlikely.

The above example would mean that the worker would contribute $5000 a year for 28 years or when they reach the age of 49. They would also contribute $6000 for another 15 years until age 65. This would yield a total of $230,000 in pre-taxed contributions. The investment earnings of this much capital, even when invested in safe low yield investments, for that many years would be staggering. The bottom line is that the contribution caps are annoying, but not a critical flaw of the Roth.

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Living Wills And Healthcare Power Of Attorneys Help To Make Sure Your Wishes Are Met

No one can foresee problems that may arise should he become incapacitated. Yet, you can avoid negative consequences of unforeseen problems by creating Living Wills and Healthcare Power of Attorneys (HCPOA).

Setting up a Living Will or HCPOA is a relatively simple task. The first step it to consult with an attorney that specializes in estate planning to ensure that your documents are clear. Here's an overview of what you can expect from your Living Will and HCPOA.

Healthcare Power of Attorney
The HCPOA, otherwise known as a ?healthcare proxy? is a legal document that enables an individual that you appoint (your ?agent?) to act as your healthcare representative if you become incapacitated. The agent becomes your acting representative at the moment you become incapacitated, thus eliminating the need for your loved ones to argue over your rights and wishes in court.

Your agent has the authority to request or deny any medical treatment that he determines to be appropriate. Therefore, it is a good idea to choose someone that you trust as your agent. Please note: In most states, your spouse will be your default agent. If you are not married but are in a lifelong relationship your partner, he does not automatically become your agent. Make sure that you appoint your partner as your agent to ensure that he or she has control over your medical decisions if you are unable to make them.

Because your agent has whatever powers you give him or her, make sure that he or she understands your desires. Some of the decisions he or she may need to make include but are not limited to:
'deciding whether or not you will receive medical treatment
?Withdrawing life-support

Living Will
A Living Will and HCPOA should be used in tandem, since one document complements the other. Your Living Will is a document that clearly expresses your desires. In short, your Living Will provides your medical team with instructions for how to carry out your wishes should you become incapacitated. For example, if you become brain dead, you can state in your Living Will that you wish to receive or not to receive life support.

By creating a Living Will, you ensure that your desires will be carried out without court involvement that can be costly and stressful for your family. Criteria for enacting a Living Will vary by state; so make sure that you consult with an attorney to ensure that your Living Will complies with the rules in your state.

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