Money for Investment and Tax Advantages

Sure can. (My wife is retired CSR and I have many clients like you.)

First a definition. Don't confuse the TYPE of investments (cd, mutual funds, ) with the two IRAs. Each IRA may use different types of investments as funding mechanisms. For example I started my IRA with cd's, but rolled them over to mutual fund accounts when I saw the light.

So then, you simply find the right mutual fund for you and roll over that regular type IRA into it. then open another mutual fund ROTH and roll over what's in your present ROTH account.

How's that for simplicity?

As for what's in your two IRA's, like Las Vegas, what happens in the account(s) stays in the accounts, iow, you don't report anything with you annual tax returns unless and until you start withdrawls.

Now then, when you do accomplish these rollovers, make sure it will be from trustee to trustee and there will be no 1099R form to worry about.

ChEAr$, Harlan Lunsford, EA n LA

The CDs are in a regular savings account and I want to traansfer them to an IRA. If I want to add cash to an IR do I add it has pretax money or post tax money?

Pretty darn good but I'm a dunce. Do you know anything about pre tax and post tax IRAs? Do I need to use post tax money or can I use pre tax money to deposit to an IRA? When I opened my IRAs and ROTH nobody really seemed to know the rules for CSR Federal employees.

OK, but I didn't use pretax money for the IRA so they're going to tax me again on the deposits. When I start a new IRA with my CDs then buy mutual funds they're going to tax me on the deposits as well when I wthdraw the principal. correct?

I don't think that'll apply to me because the IRAs will be new account with fresh deposits.

One additional comment: If you were asking How do I report money I put into a nondeductible IRA, the answer is Form 8606. If you didn't file in the year you made the contribution, do it now.

You can't do either unless you or your spouse is working and has "earned income," a/k/a "taxable compensation." This term is explained in Chapter 1 of IRS Publication 590.

Contributions to a traditional IRA may be either deductible (pre-tax) or nondeductible (after-tax). There are two issues in determining this: coverage by a retirement plan and, if you are covered, your AGI.

The fact that you are receiving CSRS benefits does not mean that you are covered by a retirement plan. Thus, if you're single and working, you can make deductible traditional IRA contributions at any income level unless you're covered by a plan at your current job. (The reason you couldn't deduct while working for the gummint was that you were covered by a plan at that time, and your income was too high.)

There are absolute income limits for Roth contributions. Those are explained in Chapter 2 of Pub 590.

When you take distributions from a traditional IRA that has after-tax money in it you calculate how much is contributions that have already been taxed and how much is earnings that haven't. You do this in Part I of Form 8606.

Yes, that's what I need to know.

First, I am not a tax professional, but I try to point you in the right direction, because you seem to have a basic misunderstanding of IRA's that others that have answered, have not addressed.

(OP is over 60 so all withdrawals are qualified)

All Traditional and ROTH IRA contributions are from after tax dollars. If you qualify, you MAY be able to deduct your _traditional_ IRA contribution from your Federal taxes which essentially makes it the same as before tax dollars - but only if you qualify to take the deduction.

ROTH accounts are always after tax dollars, only the earnings grow tax free. When you withdraw from a ROTH you pay no additional tax because it has already been paid on contributions and the earning are not taxable either.

Traditional IRA withdrawals, on the other hand, are taxed as ordinary income -- except that any contributions that you have already paid tax on, and could not deduct because you did not qualify for the deduction, are not taxed again -- that is, for the sake of discussion, your "after tax" contributions, or your "basis" as it is called. If you are still employeed and are covered by an employeer retirement plan as you indicate, then you are probably not qualified to take a deduction.

When you make non-deductable contribution you report it to the IRS on form 8606 and also use that from to keep a running total of all previous basis. You need to do that so that when you take a distribution, you don't get to withdraw _only_ taxable or un-taxable dollars, rather you have to withdraw some of each pro-rated and to do that you have to know your total basis in the IRA.

I have used TurboTax for years and it has all kinds of forms and help for IRA contributions. If you used the "forms" method, just open form

8606-T (T= taxpayer for your self), for 8606-S (S=Spouse), and ask help for instructions - it will lead you to the IRA contributation worksheets, etc.

If you use the "interview" method, there is a whole section on Retirement/IRA's, I don't know how you could have missed it.

If you are talking about CD's that are within your IRA, there is no "tax liability", until you take a distribution. Taxes on distributions from you Traditional IRA are pro-rated using your basis (see above) and distributions from your ROTH are tax free.

As far as you investments go, you are free to invest in anything you want.

Remember, when you become 70 1/2 you MUST start taking mandatory distributions from your Traditional IRA, like it or not. This does not apply to a ROTH. For that reason, depending you your circumstances, it could be better to add to the ROTH with after-tax dollars, particularly if you cannot deduct your Traditional IRA contributions.

See above.

Probably because you are covered by a retirement plan (you only get to deduct IRA contributions if the IRA is your ONLY retirement plan).

Like I said above, at your age (younger than me), it might be better to add to the ROTH because you won't be subject to mandatory distributions at 70 1/2.

I'm still working. How much casn I contribute per year and can I make withdrawals at anytime of contributions and profits? If I deposit money into a ROTH and w/d the profits before the five year window what is the penalty?

Yes, I'm covered by CSR retirement and I have a supplemental TSP account.

Sorry for the misunderstanding I'm still working for the Feds.

The 2007 limit is $4,000 ($5,000 if you're age 50 by the end of the year. In 2008 the limits go up $1,000.

With any IRA you can take any money out of it you want at any time, but there may be tax consequences, depending on your specific situation.

Instead of asking people here to rewrite the IRS Publication, please spend some time reading it (Pub 590), then come back with questions if there's some specific detail you don't understand. A clue to whether you've done your homework is whether you provide enough information about your specific situation for someone to answer you question rather than having to come back with a ton of questions.