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Google Questions answered volume 1 – I just received a large windfall, can I put it in an IRA?

I am trying out a new feature. In my tracking I am going to take queries from google that have led people to this site and answer them in these short bits. First up:

“I just got $20,000.00 can I invest it in an IRA?”

Assuming you have not maxed out your individual contribution for the year, yes SOME (or all, see below) of it. The max contribution is currently $5000.00 per year ($6000.00 if you are above age 50). Depending on your income, to maximize the amount you are putting in, you could put the after-tax five grand in a roth IRA. As for the rest, a high yield savings until the next year is one option, or invest it, or perhaps get a bond. Remember, saving for retirement doesn’t have to be limited to tax-advantaged retirement accounts.

Now heres an entirely different and more creative approach:
Assuming you are working, for the rest of the year increase your income contribution to your 401k (assuming you have one) substantially and use the windfall as your supplemental income. Depending on your income, combining this with an IRA contribution would allow you to invest all 20k into retirement accounts in a year.

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