Did you know that the IRS allows contribution into your Traditional and/or Roth IRA’s for 2021 all the way up to April 15th, 2022? Why is that important? The additional 3 and halves months the IRS allows for prior year contributions can be a huge opportunity if you properly take advantage. If whatever reason you were not able to contribute to the max during the calendar year of 2021, these additional extra months allow you to “catch up” for the prior year without impacting your current year contributions.
Current contribution limits for both Traditional IRA’s and Roth IRA’s did not change from 2021. They are $6,000 per year per individual if under the age of 50. After the age of 50, the IRS permits an additional $1,000 per year, so $7,000 per year, as a “catch up” provision if you have not been fully funding your IRA. The additional 3 1/2 months are also key if you start to fund an IRA in the middle or late of the previous year. Example: Say you decided to open up your Roth IRA in October of 2021 with a $400 per month contribution. That would only have given you the opportunity to set aside 3 month or $1200 for 2021. However, with the extension into 2021, you can still add 3 more months or another $1200 for 2021 for a total of $2400 for 2021. I know, I can hear the crowd saying “but now you only have 9 months to fund 2021. Yes, however then extension is provided every year. Also take into consideration that you may have additional income moving forward that could apply to the current year IRA’s.
If you are undecided about what type IRA (Roth or Traditional) you should have, please visit my blog post on the subject which thoroughly covers the topic. I have provided a link here: https://louisromero.com/ira-traditional-or-roth/
If you would like a personalized evaluation of which IRA would be best suited for you, please contact me directly at Louis@louisromero.com.