With annual 2024 contributions limited to $7,000 ($8,000 for those age 50 and older), your retirement security can’t afford you making mistakes with your IRA. Yet many IRA investors do.
Younger people have many financial buckets to juggle: student loans, car loans, and the expenses of a first-time apartment or home. That doesn’t mean you should ignore saving for retirement. It may bring a modem of reassurance to know that while an IRA is not an emergency fund, you may be able to access IRA money without tax or penalties for a financial emergency. Premature withdrawals aren’t ideal for anyone, but they’re generally better than not contributing to an IRA as early as possible.
Married couples with one earner may forget that they can make annual contributions on behalf of a spouse who is not working. As long as the earning spouse has enough earned income to equal the contributions, each spouse may contribute up to $7,000 ($8,000 for ages 50 and older) to an IRA for the 2024 tax year.
Tax-sensitive procrastinators may make IRA contributions until the April 15, 2025 tax filing deadline. However, keep in mind that last-minute contributions give your investments less time to compound and you potentially have less money for retirement. If you can’t make your contribution all at once at the beginning of the year for optimal compounding, use a monthly contribution strategy to contribute the most you can, the earliest you can. It makes a big difference over the years.
Older IRA owners no longer have to end contributions to traditional IRAs at age 70 1/2, thanks to the Secure Act. Like the Roth IRA, contributions are allowable for people of any age. So long as you have earned income and can afford to contribute to an IRA you have options. Remember that a Roth IRA has no required minimum distributions and contributions are not tax deductible, unlike traditional IRAs.