IRA Contributions Are Due July 15: Four Tips On Why You Shouldn’t Let That Opportunity Slip Away

Don’t miss the July 15 deadline to fund your IRA! Those annual contributions can add up to big account balances over time.

The clock is ticking but you still have time to contribute to your Roth or Traditional IRA and have it count for 2019.

A quick recap: the contribution limits for 2019 are $6,000 if you were under age 50 and $7,000 if you were 50 or over by 2019 year-end.

You have until July 15, 2020 to submit your contribution.

Here’s 4 pro tips on how to make the most of your contribution:

Tip #1: If you are eligible to fund a Roth IRA, make sure you do so.

The Roth IRA lets you grow wealth tax-free over time. If you ever need the funds, you can always withdraw your contributions without fee or penalty. But if those funds stay in the Roth account, they’ll be forever free of tax. What’s not to like about that?

It’s amazing how that modest $6,000 per year contribution can grow over time. If you start contributing to a Roth at age 22, and continue until you turn 65, you could accumulate almost $1,300,000 in tax-free wealth, assuming a 6% annual growth rate. That’s proof that mighty oaks do grow from little acorns!

For a deeper dive into Roth IRAs, and why we rate them the most versatile and valuable savings accounts around, check out Mari’s April 2020 interview with journalist Kim Lankford for AARP.

Tip #2: Non-working spouse? Make sure there’s an IRA with your name on it.

If you’re a stay-at-home spouse, there are plenty of ways to keep your retirement kitty growing. Keep in mind that you can contribute to a spousal IRA if you’re married even if you don’t work, as long as your working spouse makes enough to cover the amount of the combined retirement contributions. For example, if a 40-year-old husband earns $75,000 at work, and deducts $10,000 for his workplace 401(k), both he and his spouse can each still contribute $6,000 per year to their Roth or Traditional IRAs. 

Tip #3: You can fund an IRA even if you contributed to your 401(k) at work.

Even if you participate in the 401(k) plan at work, you can “double-dip” by funding a Traditional or Roth IRA. That could be a smart move (or not), depending on your income and tax situation. Your financial advisor or tax preparer can steer you in the right direction.

Tip #4: Making a non-deductible IRA contribution? 

It doesn’t need to go into a separate account (that’s a misunderstanding of the tax rules). But make sure you do report it when filing your taxes so you don’t get taxed twice on the same non-deductible dollars.

Likewise, remember to report deductible IRA contributions on your 2019 tax return to get the maximum tax savings.

Please contact us with your IRA questions so we can help ensure your accounts are funded before the deadline!

Mercer Global Advisors Inc. is registered with the Securities and Exchange Commission and delivers all investment-related services. Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services.

About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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