Tax planning tip of the week

Your tax return is filed – or at least extended.

Your 2010 IRA contribution is in the account, growing for your retirement.

Now you can forget about taxes for a year. Right?

Now is the time for you to begin funding your retirement accounts for 2011. If you wait until the last minute to deposit money into these accounts, you miss out on months of opportunity for tax-deferred – or tax-free, in the case of a Roth account – earnings.

Roth accounts stand out among the other retirement account options in that withdrawals from Roth accounts after age 59½ are generally not taxed. Besides tax-free growth, the Roth accounts have flexible withdrawal rules. You can take out your contributions (but not gains) for any reason without paying taxes or penalties. After age 59½, provided you have had the account open for at least five years, you can withdraw your gains without tax or penalty.

For 2011, joint filers with modified adjusted gross income (MAGI) below $179,000 can contribute to a Roth IRA. Single individuals have a MAGI limit of $122,000. Contributions are limited for joint filers with MAGI over $169,000 and single filers with MAGI over $107,000.

The contribution limits for Roth IRAs are the same as for traditional IRAs – $5,000 per person, with an increase to $6,000 for those age 50 and over.