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January 2003

Q:I didn't contribute to my IRA in 2002, and I'm regretting it. Can I still make a contribution for 2002, before the April 15 tax deadline?

A: Yes, a window remains for you to make a 2002 IRA contribution. For both traditional and Roth IRAs, the contribution deadline for any given year is April 15 of the following year. (Filing for an extension on your tax return deadline does not extend the IRA contribution deadline.) This means that you have until April 15, 2003, to make a 2002 contribution to your IRA. When you make your contribution, be sure your IRA manager understands that your contribution is intended for 2002, rather than 2003.

If you plan on making a contribution closer to the April 15 deadline but want to file your tax return earlier, you can still include the planned contribution on your tax return. If for some reason you are unable to make the contribution as planned, you should then file an amended tax return with the IRS.

Remember that it is the traditional IRA, not the Roth IRA that may be eligible for a tax deduction. The amount of your deduction will vary, depending on your total adjusted gross income and filing status. Taxes on your earnings are deferred until withdrawal, when you will likely save money by filing within a lower tax bracket. Roth IRAs are not tax deductible, but the earnings on your investment are tax-free.

In either case, it makes good sense to maximize your yearly IRA contributions. Remember that the 2002 tax year is the first to be effected by recent tax reforms, which increased the annual contribution limit for both traditional and Roth IRAs.

The contribution deadline for other forms of IRAs, such as the SIMPLE IRA and SEP plan, are determined by your employer's tax filing deadline, including extensions.

As always, be sure to work with a financial professional who can advise you on IRA contributions and the best strategy to meet your retirement savings goals.

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