Take a look at the budget that you follow for your personal finances; do you have a line item for making your annual IRA contribution (perhaps it’s understood to be part of the “savings” or “retirement savings” amount)? But do you always follow through and make sure that you’re contributing the maximum amount to your IRA each year? If not, then here are some tips to help you come up with new ways to make your annual IRA contributions.
Use Last Year’s Tax Refund. Too many individuals have gotten into the habit of thinking of their tax refund as a windfall or “found money.” While there may be a certain degree of satisfaction and enjoyment that comes from using your tax return to treat yourself or your family to something nice, you should also consider what you could be doing with your tax reTake a look at the budget that you follow for your personal finances; do you have a line item for making your annual IRA contribution (perhaps it’s understood to be part of the “savings” or “retirement savings” amount)? But do you always follow through and make sure that you’re contributing the maximum amount to your IRA each year? If not, then here are some tips to help you come up with new ways to make your annual IRA contributions.
Use Last Year’s Tax Refund. Too many individuals have gotten into the habit of thinking of their tax refund as a windfall or “found money.” While there may be a certain degree of satisfaction and enjoyment that comes from using your tax return to treat yourself or your family to something nice, you should also consider what you could be doing with your tax refund instead; namely, making all or part of your IRA contribution for the coming year.
Use the First Few Months of Next Year if Necessary. Even though the tax year closes on December 31, you actually have until the date on which you file your taxes to make a contribution for that tax year. So, if you wait until April 15 to file your taxes for the prior year, then you have those three and half months (from January 1 until April 15) in which to make an IRA contribution for the tax year that just closed. If you find yourself in a bit of a cash crunch at the end of the year, using this extra time can be a financial lifesaver.
Dip Into Your Emergency Fund. This technique is a bit risky, but it’s worth considering for some taxpayers. If you fail to make the maximum contribution to your IRA in any tax year, there’s no way to make up for it later. Missing out on this opportunity can significantly reduce the funds you have available at retirement. If you have a large emergency fund, you may wish to use some of that money in order to make the maximum IRA contribution – provided that you are able to replenish your emergency fund soon thereafter. Making IRA contributions is important, but so is having funds available in case of an emergency occurs.
Contribute Over Time. Don’t fall into the trap of assuming you need to make your entire $6,000 contribution (or $7,000 contribution if you’re age 50 or older) all at once. Those amounts are merely the annual contribution limits, and you can make as many individual contributions as you want during the tax year, provided that the total amount of contributions does not exceed the limit. Some people find the best solution is to contribute a pro rata amount each and every month during the year.
Don’t wait another year and take a chance on missing out on making the full IRA contribution. Use the tips above to make sure you can max out your IRA each and every year.
fund instead; namely, making all or part of your IRA contribution for the coming year.
Use the First Few Months of Next Year if Necessary. Even though the tax year closes on December 31, you actually have until the date on which you file your taxes to make a contribution for that tax year. So, if you wait until April 15 to file your taxes for the prior year, then you have those three and half months (from January 1 until April 15) in which to make an IRA contribution for the tax year that just closed. If you find yourself in a bit of a cash crunch at the end of the year, using this extra time can be a financial lifesaver.
Dip Into Your Emergency Fund. This technique is a bit risky, but it’s worth considering for some taxpayers. If you fail to make the maximum contribution to your IRA in any tax year, there’s no way to make up for it later. Missing out on this opportunity can significantly reduce the funds you have available at retirement. If you have a large emergency fund, you may wish to use some of that money in order to make the maximum IRA contribution – provided that you are able to replenish your emergency fund soon thereafter. Making IRA contributions is important, but so is having funds available in case of an emergency occurs.
Contribute Over Time. Don’t fall into the trap of assuming you need to make your entire $6,000 contribution (or $7,000 contribution if you’re age 50 or older) all at once. Those amounts are merely the annual contribution limits, and you can make as many individual contributions as you want during the tax year, provided that the total amount of contributions does not exceed the limit. Some people find the best solution is to contribute a pro rata amount each and every month during the year.
Don’t wait another year and take a chance on missing out on making the full IRA contribution. Use the tips above to make sure you can max out your IRA each and every year.