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Subject:  Re: Roth IRA deadline follies Date:  4/1/2002  6:19 PM
Author:  gomaa Number:  34082 of 88532

Be careful here...

If things work out such that I have contributed $4000 to Roth IRAs for 2001, what bad things happen when? Can I just have one or the other relabeled as being contributions for 2002 and how difficult is that?

Your total IRA contributions for tax year 2001 cannot exceed $2000 (likewise the total limit for 2002 is $3000). That's not total per account, it's total for all accounts, both traditional and Roth IRAs. If you contribute more than $2000 for 2001, you will be subject to an overcontribution penalty of 6% per year. You don't want to overcontribute--I did it last year and it's a pain to right the wrong.

I'm wondering if I should open a separate Roth IRA here at my credit union, just to be sure I get the money in for 2001. The upside is I can go into their office and do it face to face, and there is no delay waiting on checks to clear, so delays will be minimized.
The downside is that they don't offer index funds, just various flavors of CD and money funds.

This really doesn't sound like a great place to put your money. Neither CD or money market funds yield high returns--their main use is a safe place to stash money. If you're investing for the long haul (and if you're opening an IRA you probably are), you want your money in stocks. This doesn't mean you need to invest in individual stocks, mutual funds, index funds, or exchange traded funds will do just fine. But if you're looking to invest in an index fund (certainly a good idea), you don't want your money in CDs.

Instead I'd look to see if you can't overnight the check back to your broker, or wire the money from a checking account. Wiring can sometimes cost around $20, but I think in your case it would be worth the hassle and guarantee the funds arriving in time. The other possibility is opening an account with an online broker (only takes about 10 minutes) and wiring the money in.

You've got two weeks--don't despair, but get cracking!

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