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Don't forget it's IRA season
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February 2, 2000: 7:41 a.m. ET
Make retirement planning by April a resolution for the new year
By Staff Writer Martine Costello
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NEW YORK (CNNfn) - Some people try new diets or plan dreamy winter getaways at the start of a new year, but investment pros say one of the most important projects you can take on is your IRA.
Whether you're a Gen-Xer just starting to save for retirement or you're 70 years old and ready to start dipping into your nest egg, you should be making IRA decisions in the months before the April 17 tax deadline.
"It is extremely important that people get this message," said Bob Corcoran, vice president of retirement product development at Fidelity Investments.
Getting started
Younger people still planning for retirement can make contributions for 1999 until April 17, and it's a good idea to set aside your 2000 donations, too. The faster you put the money aside, the more time it will have to grow tax-free.
Too many young people think they can put off long-term investing plans because they have 20 or 30 years until they'll retire. It's one of the worst mistakes they can make, since they'll miss out on thousands of dollars that will grow because of compound interest.
By law, you can contribute up to $2,000 a year to a traditional IRA or a Roth IRA. With a traditional plan, you can deduct your contributions and you'll pay income taxes when you withdraw it. With a Roth IRA, you can't deduct your contributions but the money is tax-free when you withdraw it.
You have to make less than $95,000 in adjusted gross income for a single person or $150,000 for a couple to qualify for a Roth IRA.
Corcoran advises people to make their contributions as soon as possible and develop a long-term investing strategy. Fidelity recently launched its NetIRA service that has a range of tools and advice to help people choose the right plan and design an investing plan, among other tasks.
"The more time the money is allowed to grow, the more income you'll have in retirement," Corcoran said. "It's important to develop an investing strategy for these assets and make sure this money is working as hard as possible for you."
New retirees
People who turned 70-1/2 in 1999 will have to start taking withdrawals (called distributions in IRA jargon) on traditional accounts by April 1, said Ira Siegler, a principal at PricewaterhouseCoopers in New Jersey.
Only traditional IRA plans require distributions by 70-1/2. If you have Roth IRAs you can let the money grow as long as you want without touching it.
You'll have some flexibility in how you decide to take distributions in a traditional plan, however. You can take them monthly, quarterly or annually, for example.
You'll have to withdraw a minimum dollar amount based on a calculation derived from IRS life expectancy tables, said Scott Kahan, a certified financial planner and president of Financial Asset Management Corp. in New York.
So if you're 70-1/2 and your IRA was worth $100,000 as of Dec. 31, 1999, you'll have to withdraw $6,250 this year, Kahan said.
If you're married, you can base your withdrawal on the combined life expectancies of you and your spouse. Since the combined life expectancy would be longer, you wouldn't have to withdraw as much. The advantage is you can leave more of your nest egg in the tax-deferred account. So if you and your spouse are 70-1/2, with a $100,000 plan, you'd have to withdraw $4,854.37 this year.
You can also use a beneficiary like a child or grandchild to calculate a combined life expectancy. But in this case, the IRS only lets you assume a 10-year age difference, so the calculation would be based on your age of 70-1/2 and a 60-year-old. In the same scenario with a $100,000 IRA, you'd have to withdraw $3,816.79.
Siegler pointed out that if you use a combined life expectancy you should get good tax advice, because you could create a big tax hit for your spouse or your beneficiary when you die.
Whatever you decide, it's time to get started now, Siegler said. 
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