If you haven’t contributed funds to an Individual Retirement Account (IRA) for the tax year 2020, or if you’ve put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until April 15, 2021, due date, not including extensions.
Be sure to tell the IRA trustee that the contribution is for 2020. Otherwise, the trustee may report the contribution as being for 2021 when they get your funds.
Generally, you can contribute up to $6,000 of your earnings for the tax year 2020 (up to $7,000 if you are age 50 or older). You can fund a traditional IRA, a Roth IRA (if you qualify), or both, but your total contributions cannot be more than these amounts.
Traditional IRA. You may be able to take a tax deduction for the contributions to a traditional IRA, depending on your income and whether you or your spouse, if filing jointly, are covered by an employer’s pension plan.
Roth IRA. You cannot deduct Roth IRA contributions, but the earnings on a Roth IRA may be tax-free if you meet the conditions for a qualified distribution.
Each year, the IRS announces the cost of living adjustments and limitations for retirement savings plans.
Saving for retirement should be part of everyone’s financial plan, and it’s important to review your retirement goals every year to maximize savings. If you need help with your retirement plans, give the office a call.