Year-End Tax Planning Series: 2011 Retirement Plan Contributions

If you have not already made your Roth or Traditional IRA contribution for 2011, you should plan to do so. The longer the money has to grow, the better off you should be.

Traditional IRAs and employer-sponsored retirement plans, such as 401(k) plans, allow you to contribute funds pretax, reducing your 201 taxable income.

Contributions that you make to a Roth IRA or a Roth 401(k) plan are made with after-tax dollars, but qualified Roth distributions are completely free from federal income tax, making these retirement savings vehicles very appealing.

For 2011, you can contribute up to $16,500 to a 401(k) plan ($22,000 if you're age 50 or older), and up to $5,000 to a traditional or Roth IRA ($6,000 if you're age 50 or older). The window to make 2011 contributions to an employer plan closes at the end of the year, while you generally have until the due date of your federal income tax return (not extended) to make 2011 IRA contributions.

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