If you haven’t already contributed to an IRA (Individual Retirement Account), there’s still time to do so. Many people don’t know that the 2020 contribution deadline is actually April 15, 2021.1 However, if you do decide to contribute, you must designate the year you are contributing for. (In this case, 2020.) Your tax preparer should be able to help you fill out the necessary forms, but please feel free to contact us if you have any questions or need help.
For 2020, the maximum amount you can contribute is $6,000, or $7,000 if you’re over the age of 50.2 This applies to both traditional and Roth IRAs. If you’re unsure whether to contribute, remember:
- Contributions to traditional IRAs are often tax-deductible. And while distributions from IRAs are taxed as income, your tax-rate after retirement could possibly be lower than it is now, lessening the impact.
- Contributions to a Roth IRA, on the other hand, are made with after-tax assets. However, the advantage of a Roth IRA is that withdrawals are usually tax-free.
- Whichever type you use, IRAs provide a great, tax-advantaged way to save for retirement.
If you have yet to set up an IRA for 2020, you can still do that. The deadline to establish an IRA is also April 15th. In other words, if you want to take advantage of the benefits an IRA has to offer, there’s still time to do so, either by contributing to an existing account or by establishing a new one.
If you have any questions about IRAs – whether one is right for you, how it should be managed, or anything else – please give us a call at Minich MacGregor Wealth Managment. We’d be happy to help you.
1 “IRA Year-End Reminders,” IRS, https://www.irs.gov/retirement-plans/ira-year-end-reminders
2 “IRA Contribution Limits,” IRS, https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits
P.S. Speaking of taxes, a number of clients have asked us about the delivery of their 1099’s. They are generated by Schwab and their deadline was extended to Friday, February 19th. This means the 1099’s should be in the mail within the next day or so. Be sure to factor in several days (at least) for delivery by the USPS.
P.P.S. Please remember, you will only receive a 1099 if you have a taxable account or if you took a distribution from an IRA. If you do NOT have Schwab accounts, please disregard as it does not apply.