Any time you can double your savings and protect your money from creditors is a good time of the year.
The period between New Years and Tax Day is my favorite time of the year, just for that reason.
You can make contributions to your IRA last year AND contribute to this year’s IRA allowance.
You get a scoop of last year’s tax benefits, topped with a scoop of this year’s tax break.
You don’t have to be filing bankruptcy for this to be important. But, this trick is a favorite of mine when I have my bankruptcy-lawyer hat on.
IRAs in bankruptcy
My goal is to maximize the value a bankruptcy client can keep through the case.
Everyone in bankruptcy can protect over a million dollars in IRA savings. Not that I’ve seen an IRA anywhere near that number. But Congress says IRA savings are a good thing, and beyond the reach of your creditors.
And I’ve never faced challenge from a bankruptcy trustee when a client contributed the maximum allowed by tax law to a retirement account, even if they sold other assets to make the contribution.
IRAs for all
Tax advantaged retirement plans are grounded in federal tax law and are available to the solvent as well as the insolvent.
Too many Americans seem to want to live in a little bubble that tells us that old age will work out OK, (somehow) whether we take responsibility for making it happen or not.
That’s magical thinking at its worst.
Unless you expect to inherit a fortune, you need to take steps now so that you are financially independent then.
Tax break opportunity is fleeting
Old age is inevitable and the tax code has an annual limit for how much you can contribute to a retirement vehicle to grow tax free. If you don’t make a contribution equal to the limit for last year, that unused tax break is lost forever.
Between now and April 15th, take two scoops of retirement savings. Or seed your retirement account with any tax refund from this year.