One of the keys to successful long-term retirement saving is to save as much as you are able, year in and year out. Consistent saving helps to insure that you’re not investing solely at market high points, and there’s simply no substitute for steady investing over time.
For the tax year 2015, individuals can contribute up to $5,500 per year to their IRAs, with a $6,500 limit for individual age 50 and over. Being able to make these annual contributions puts you in the best possible position to reach your retirement goals, in large measure because once you miss the opportunity to make an IRA contribution for a given tax year, you can’t go back later and make up for it. Your annual IRA contributions are the ultimate “use it or lose it” situation.
Here are some tips for helping you make the maximum contributions to your self-directed IRA in 2015.
1. Plan Ahead. Of course, the best way to put yourself in a position to make the maximum allowable contributions to your self-directed IRA in 2015 is to plan ahead. This means incorporating your IRA contributions into your budget.
One of the most common reasons that individuals come up short with their annual contributions is that they take the approach of waiting until the end of the year to begin thinking about how to come up with their contributions or, worse yet, simply taking the approach that they’ll contribute whatever money they have “left over” at the end of the year. You’ll rarely be successful with this type of a passive savings approach.
2. Prioritize. Sometimes retirement savers are intimidated at the prospect of making a one-time contribution of $5,500 (or $6,500 if you’re age 50 or over). But these amounts are simply the annual caps on contributions to your account. If it’s a better fit for your budget and cash flow, you can choose to make smaller quarterly or monthly contributions, or even allocate a small portion of each paycheck to your self-directed IRA.
Note that these limits are cumulative annual amounts, so an individual with multiple IRAs can contribute a total of $5,500 to their accounts, not $5,500 to each account. If you choose to have multiple self-directed IRAs (and there are some very good reasons you may wish to do so), then plan accordingly.
3. Get Creative. You may be familiar with the concept of strategically selling certain losing investments from your taxable accounts in order to offset the gains you’ve realized from other investments, thereby reducing your overall tax bill. By the same token, this type of strategy may be able to get your taxable income low enough for you to be able to make a deductible contribution to a traditional self-directed IRA, thereby reducing your tax bill even more.
Remember that with a self-directed IRA, you’re not cut off from making contributions for a particular tax bill on December 31 of that year. So, you actually have up to April 15, 2016 (or the date on which you file your 2015 return, if you do so before April 15) in order to contribute.