Bonus - Roth IRA - 2007 or 08 contrib?

[polyhymnia]

I will be getting a small (~$1k) annual bonus in a couple of weeks. Traditionally I have put my bonus money into my Roth IRA. I have not made any contributions for 2007. Should I put this money in for 2007, or for 2008? What are the pros/cons of putting it in for one or the other? Is there anything "better" you would recommend I do with the money? I have no debt aside from student loans at 1.65% and I am not interested paying those down ahead of schedule, my partner and I have a shared emergency fund and other savings as well, I would really like to earmark my bonus toward "me" if that makes sense (and yes, I am keeping out about $100 for myself for a nice treat )

[SeekingJoy]

Go for the 2007. Then see if you can match it over then next 12 months. Congrats!

[TheGirls]

If you didn't contribute anything for 2007, I'd do that. Then you could still contribute $4000 in 2008, should you be able to. If not, you haven't lost out on anything - the ability to contibute for 2007 expires in April. From the perspective of the IRA itself, the money is treated the same no matter what year it is earmarked for, you just can't contribute more than $4000 per year.

[zersha]

This is OT, but how did you get SL interest rates that low? Dh has several that will be coming out of deferrment soon. I think they are supposed to have an interest rate of over 6%.

[polyhymnia]

Originally Posted by SeekingJoy

Go for the 2007. Then see if you can match it over then next 12 months. Congrats!

Thanks, that makes sense!

Originally Posted by TheGirls

If you didn't contribute anything for 2007, I'd do that. Then you could still contribute $4000 in 2008, should you be able to. If not, you haven't lost out on anything - the ability to contibute for 2007 expires in April. From the perspective of the IRA itself, the money is treated the same no matter what year it is earmarked for, you just can't contribute more than $4000 per year.

Thanks, I wasn't sure exactly how things work once in the IRA. It makes sense to credit it to 2007 then and leave my full $4k eligibility for 08 - and try to max it out this year (unlike last year ).

Originally Posted by zersha

This is OT, but how did you get SL interest rates that low? Dh has several that will be coming out of deferrment soon. I think they are supposed to have an interest rate of over 6%.

It's all luck, I'm afraid. They are the subsidized stafford loans, and I just happened to graduate/consolidate at the lowest point ever for student loans. I think the rate from the Stafford loans was 4% or so, then I consolidated w/Sallie mae to get a rate of 2.65% (actually 2.9%, but I got a .25% reduction for signing up for online statements and direct debit payments), and then I just hit my 3 years of on-time payments for a further 1% deduction. Sadly I don't think any of the loans are giving such a good rate anymore - my brother who graduated 2 years after me has a rate several points higher.

[Sarah8Jane]

Originally Posted by crayolaab

It makes sense to credit it to 2007 then and leave my full $4k eligibility for 08 - and try to max it out this year (unlike last year ).

The max is actually $5k for 08.
Congratulations on the bonus and good luck this year!

[PrettyBird]

Originally Posted by Sarah8Jane

The max is actually $5k for 08.
Congratulations on the bonus and good luck this year!

Yep! It just went up to 5k! Anyway, like others said, I would do it for 07, that way you still have the option of putting more in this year. There is no advantage to putting it in 08 vs 07.