An Individual Retirement Account (IRA) is a tax-advantaged home for your retirement funds to live in until you start taking distributions during retirement. Contributions to IRAs are made on an annual basis, based on a limit for total annual contributions that is set by the IRS.
Many people make IRA contributions monthly, with automatic contributions scheduled from their bank account just like any other bill that might be set to auto-pay. But, what if those monthly contributions didn't add up to quite as much as you thought they would?
Is there anything you can do now if you didn't hit that annual contribution limit for 2018?
Here are 3 things you should know about making year-end IRA Contributions.
1.It is NOT too late to make 2018 contributions to your IRA
In fact, you have until Tax Day on April 15th to do so.
If you are making contributions to your IRA before Tax Day, be sure to indicate what tax year you would like the contributions applied to. The simplest thing to do if sending a check is to just write “2018 Contributions” on the memo line. That way there is no confusion about whether your contribution is for the 2018 or 2019 tax year. If you are making contributions through ACH or other electronic means, it may be a good idea to consult with your financial advisor to ensure your contribution is applied to the correct tax year.
2. It is not too late to open a NEW IRA
Don't have an IRA yet? No problem! You can open an IRA anytime between now and Tax Day, and as long as you make contributions before April 15, you can still reap the tax benefits for the 2018 tax year. The same rule applies for Traditional, Roth and SEP IRAs.
3. Contribute up to $6,500* to your IRA
For the 2018 tax year the contribution limit for IRAs is $5,500. Plus, if you are over age 50, you can contribute an additional $1,000 in catch-up contributions. That's a total of $6,500!*
Contribution limits for IRAs, like other qualified retirement plans, are set by the IRS. The IRS announced last year that it would increase IRA contribution limits for the 2019 tax year.
If you are interested in making year-end IRA contributions, or would like to open a new IRA, call or email us and we'd be happy to sit down and talk with you!
We recommend that if you are opening a new account or making 2018 contributions, you do so before April 8th to allow for any necessary processing time. If you have specific tax advice, we suggest you consult with your tax advisor.
*Must be aged 50 years or over in order to make a catch-up IRA contribution.
This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
This information is not intended to be a substitute for specific tax advice. Tax services are not offered by Personal Financial Strategies, LPL Financial or affiliated advisors. We suggest that you discuss specific tax issues with a qualified tax advisor.