Welcome to Ask Clark, a column designed to answer your financial questions, by money expert Clark Howard.
Can I Contribute to My Roth IRA the Same Year I Turn 50 or Do I Have to Wait a Year?
Tina from Florida asks: “I understand that at age 50 and above, you can contribute $7,000 to the Roth IRA. I’m turning 50 in June 2022. I’m trying to figure out when to change my biweekly contributions. Can I contribute the extra $1,000 starting in tax year 2022 or do I have to wait until 2023?”
Clark’s Take on When You Can Start Contributing Extra to Your Roth IRA
Clark says: “You do it in the year you turn 50.”
The IRS issues rules on annual contribution limits for retirement accounts. For Roth IRAs, the 2021 limit is $6,000 if you’re under 50 years of age and $7,000 if you’re 50 or older. As of this writing, the IRS has not yet issued information for 2022.
If your employer offers a high-deductible health plan, Clark also suggests that you open and contribute to a health savings account (HSA).
“An HSA is an even better place to stash cash for your retirement years than a Roth IRA.”
The reason Clark says an HSA is more advantageous than a Roth IRA is because of the tax benefits. Here are some of them:
- Your contributions may be excluded from your gross income, which lowers your tax liability.
- The interest you grow in your account is tax-free.
- You get to pay for eligible expenses tax-free.
“So that makes it one step better than a Roth although it’s more limiting since it’s only for health-care expenses,” Clark says.
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