Taxes: The Good News or the Bad News?
That is what my wife asked me when she paged me at work today. I already feel a little like a slug for pawning our taxes off on a professional. The last thing I want to hear is that we really dropped the ball in some other way.
Luckily for us, it wasn’t too much bad news. It was simply that we owe about $1,400 in taxes. The good news is that we may be able to avoid $1000 of this if I simply contribute $4000 to a traditional IRA for last year. I had already thought about contributing to a Roth for 2006 but had ruled it out for multiple reasons (see this post). The opportunity to avoid about $1000 of taxes changes the picture. Ideally we are using the majority of our savings right now to build an emergency fund. However, by contributing the majority of our savings to an online savings account we have been focusing a little too much on the short term given the historical yield of the stock market.
I have been hesitant to invest lump sum the market right now as it seems to be teetering near a peak. This however, has forced my hand as I am not about to send an extra $1000 to Uncle Sam when I have $4000 sitting in a savings account. Ideally this should be a no brain-er but I am still a little gun shy from my past investing experiences.
The next 30 years should tell me if this was a good investment or not.
