Tax day approaches. With it comes the IRA contribution deadline.
You expect to live for decades after you’re eligible for Social Security, don’t you?
Then, you have only until April 15th to use the 2021 allowance for contributions to a tax-advantaged IRA.
Miss making that 2021 contribution and it’s gone for all time.
So, you miss out on that contribution growing, tax free, until you withdraw it. You miss the miracle of tax-free compound-interest.
Do you really want to miss this opportunity?
Contributions have annual limits
For reasons that I’m sure made (some) sense at the time, Congress capped how much you can contribute to your IRA each year.
For 2021, the contribution cap is $6000, unless you are 50 or over, when it rises $7,000.
These numbers are caps; you can contribute less if that’s all you can manage.
Window for contributing closes
Whether or not you choose an IRA where you can deduct your contribution from your taxable income for the year or not, contributions for 2018 have to be made by the standard date for filing tax returns.
Even if you get an extension to file the return, the window to make a 2021 contribution closes on April 15th this year.
Once the standard date for filing tax returns passes, you can’t go back and add money to your IRA under the cap.
IRA doesn’t have to be complicated
It’s easy to get paralyzed by the choices you have for retirement savings:
- banks or brokerage firms;
- deposit accounts or stocks;
- traditional IRA or Roth IRA.
If you’re overwhelmed, just open an IRA account and make a contribution. There are no bad decisions when it comes to savings.
When the dust settles, you can evaluate what to invest the money in or whether to convert the account to a different flavor.
But snooze here, and you lose forever the chance to make a tax advantaged contribution to your old age.
Why I obsess about IRA’s
Too many people who need me for help with their debts have NOTHING saved for their old age. Those who have saved something generally have under $10,000.
Hard times lie ahead for these folks: lives are longer and Social Security rises only with the cost of living. The average Social Security check is about $1300/month.
You don’t live well, anywhere, on $1300 a month.
Or you become dependent on your family, if you HAVE family. Dependency is never appealing.
Take the first step toward taking responsibility for a better old age.