Answer: Recent changes to the tax code allow you to jump-start your IRA investment for this tax year. The annual contribution limits were bumped to $3,000 for the 2002 tax year, and people 50 or older can make an additional contribution of $500 for a total of $3,500.
If neither you nor your spouse are covered by a qualified retirement plan at any time during the year, your allowable contributions to a traditional IRA are fully tax-deductible, subject to certain income restrictions. See IRS Publication 590, Individual Retirement Arrangements (IRAs), for additional information.
A way to jump-start this even more is by opening Roth IRA accounts instead of Traditional IRA accounts. The contribution limits are the same for the Roth IRA accounts; the difference is that the contributions aren't tax deductible. Instead, qualified distributions in retirement are free of federal taxes.
So you pay the taxes now, and reap tax-free returns later. Consult with your tax professional before deciding on this approach, since your current tax rates and expected tax rates in retirement will influence whether Roth IRA accounts are the right decision for you.
