2023 may be over but you still have time to contribute to your IRA. How much time? You may contribute to your IRA for the 2023 tax year until April 15, 2024. For the 2023 tax year, the maximum you may contribute is $6,500 (or $7,500 if you are over 50 years old).
Which type of IRA- traditional or Roth- is best for your personal situation? It depends. Ideally, you should reach out to your financial planner or tax advisor now to talk about your financial goals and whether contributing to an IRA makes sense for your situation. However, here are a few considerations to keep in mind.
First, whether you may contribute to an IRA depends on your income. If you have earned income and do not have access to a retirement plan through your employer, it is likely you may contribute the full amount of income you have earned up to the maximum contribution amount ($6,500 or $7,500, based on your age) to an IRA. If you have access to a retirement plan, you must determine whether your income is under or exceeds the IRA deduction phaseout limits for traditional and Roth IRAs.
Next, after you determine whether you may contribute to either IRA, consider whether you want your contribution to be tax deductible (traditional IRA) or not (Roth IRA).
What can you do? Reach out to your financial planner or tax advisor before March 1st and schedule a time to talk about your financial plan. Ask: am I eligible to contribute to an IRA? Which type of IRA- traditional or Roth- should I contribute to, based on my financial situation? What are the pros and cons of contributing to either type of IRA?
Wendolyn Forbes is a CERTIFIED FINANCIAL PLANNER™ with Wealth Transition Finance, A Member of Advisory Services Network, LLC. Wendolyn is a fee-only financial planner and member of the National Association of Personal Financial Advisors (NAPFA).
CFP Board owns the marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® (with plaque design) in the U.S.
This material is provided as a courtesy and for educational purposes only. Advisory Services Network, LLC does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state laws are complex and constantly changing. Consult your own legal or tax professional for information concerning your individual situation.
Originally published in the January/February 2024 edition of Positively Haywood.