We’re getting closer to the April 18, 2022 deadline for filing your 2021 taxes and funding your IRAs or Roth IRAs for 2021 (that’s last year).
The maximum amount you can contribute to your IRA for 2021 is $6,000 or 100% of taxable compensation ($7,000 if you turned 50 by the end of last year). That’s the same amount as the prior year.
Your IRA may be deductible depending on your income levels and whether you or a spouse are covered by a workplace retirement plan. The rules can be complex, so please call us before the deadline to review your situation.
A deductible or Traditional IRA can help you reduce your tax bill and also build up your retirement nest egg.
Traditional IRAs are best for people who need an immediate tax deduction or want to defer income in the hopes that their bracket will be lower in the future. That may include people expecting to retire shortly and those who believe their income will go down in future years.
On the other hand, a Roth IRA (which is not deductible) may be best for a younger saver who doesn’t need the immediate tax deduction, but can benefit from decades of tax-free growth. In fact, Roth IRAs are ideal for long-term savers currently in a lower tax bracket.
Here’s a key fact about IRAs you may not know. If your income is below certain levels, you can participate in a savings plan at work – like a 401(k) – and still deduct your IRA.
And here’s another little known strategy. Even if you’re a stay-at-home spouse, you may be able to fund your IRA as long as your spouse works and other conditions are met.
The Takeaway: Give us a call. We’re happy to discuss the options with you. Just remember that the April 18, 2022 contribution deadline is hard and fast. There are no extensions when it comes to IRA contributions, so call us as soon as possible, and before filing your taxes, to explore this use-it-or-lose-it retirement savings opportunity!