There’s Still Time To Contribute To Your IRA for 2021

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There’s still time to contribute to your Individual Retirement Account (IRA) for 2021.

The tax year ended on Dec. 31, 2021, which was also the deadline to contribute to your 401(k) for the year.

However, the deadline to contribute to your IRA is the filing due date for tax returns. So you can make 2021 IRA or HSA contributions through April 18, 2022.

For 2021, you’re allowed to contribute up to $6,000 to an IRA if you’re younger than 50 and $7,000 if you’re 50 and older. Those numbers hold true whether you’re contributing to a traditional or Roth IRA.


Traditional vs. Roth IRA Contributions

It’s hard to think of a retirement investment vehicle that Clark loves more than a Roth IRA.

There are income limits that can disallow you from contributing to a Roth IRA if you make too much money. But because you’re contributing post-tax dollars, you’ll be able to withdraw all of the money you put in, and all of the return your investments generate, completely tax-free in retirement.

Traditional IRA contributions often reduce your adjusted gross income (AGI): the amount of taxable income you made in 2021. So while you’ll have to pay taxes on your gains when you withdraw money from a traditional IRA in retirement, lowering your tax bill is an immediate advantage.

For more on the difference between traditional and Roth IRAs irrespective of deadline-pushing 2021 contributions, read our article here.


Why Would You Want To Contribute to 2021 in 2022?

Depending on your salary, socking away $500 per month toward your retirement via an IRA can be more or less difficult.

However, in the context of financing your retirement, $6,000 or $7,000 is a relatively small number. Maxing out your allowed contributions is a big step toward securing your retirement. And once a year passes in which you don’t reach that limit, you’ve lost an opportunity.

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Outside of securing a company match inside of a 401(k), IRAs are one of the best tools at your disposal to save for retirement.

Of course, putting more money toward your 2021 IRA limits in the first three-and-a-half months means that those dollars won’t count toward your 2022 limits (which remain the same as last year). You also should consider your overall financial circumstances before contributing any investment money.

But depending on your financial situation, it may make sense to contribute up to your 2021 limits early this year before switching to 2022.

For example, maybe you’re in a position to contribute $1,000 per month toward your IRA but didn’t start until October 2021. In that case, you can still contribute $500 toward your 2022 IRA in January, February, March and April while adding $2,000 to your 2021 IRA limits. Or you can put all $1,000 per month ($4,000 total) toward your 2021 limits while having plenty of time to reach your 2022 limits after April 18.

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