Everyone is looking for tax savings at this time of year. One of the best things you can do is contribute to an IRA. It might reduce your taxes this year, and the money will grow tax free. There is still time to do it and have it apply to the 2010 tax year. You and your spouse can each contribute up to $5,000 a year ($6,000 if you are 50 or older). This amount may be less if you are already investing in a 401K at your workplace.
If you are a retiree, but have part-time employment, you can continue to contribute to an IRA up until the age of 70, although the amount is dependent upon your earnings. It’s an easy way to save money if you don’t need the cash right away. If it turns out that you do need the money, you have the option of beginning withdrawals from your IRA at age 59½.
What is best for you is an individual matter, but for most people, a traditional IRA works better than a Roth IRA. With a traditional IRA, your money is deducted from your income and deposited tax free. You pay taxes on it when you begin withdrawing it. At that time, since you would no longer be employed, you would probably be in a lower tax bracket. With a Roth IRA, you pay taxes now, the money grows tax sheltered, and you withdraw it tax free.