If last year’s tax prep is still fresh in your mind, it might be a great time to boost your IRA’s balance while avoiding any penalties. Maggi Tax shares four tips that will help maximize your IRA’s growth.
- Play catch up
Did you know that IRA owners approaching retirement can make a “catch-up” contribution to their accounts? Employees ages 50 years or older are eligible to add extra funds to their IRAs in the years leading up to retirement. For the 2021 and 2022 tax years, up to $1,000 more or a total maximum of $7,000 per person can be contributed. A married couple over 50 years old and eligible may make a combined contribution of $14,000.
- Use that tax refund
Most of the time, a tax refund is “new money” that isn’t budgeted for so why not consider using part of it to make an IRA contribution? The IRS even created Form 8888 which offers taxpayers the option to have some, or all of their tax refund directly deposited to an IRA custodian.
- Max out
Set yourself up for success by contributing the maximum amount to your IRA. For the 2021 and 2022 tax years, those under age 50 were permitted to invest up to $6,000 (or lesser of your taxable compensation) in traditional and Roth IRAs combined. Currently, the dollar value of this deduction depends on your income tax rate and can range from $720 for employees paying a 12% income tax rate to $2,220 for high earners in the 37% tax bracket. Because many choose not to invest the maximum, this can lead to a potential loss of thousands of dollars.
- Invest early and soon
Instead of making an IRA contribution at the start of a tax year, many choose to contribute during the last two weeks before a tax year’s filing deadline. However, by investing earlier in the tax year, the compounded effect on your investment can make a significant difference.
For over 30 years, Maggi Tax has guided Tampa Bay residents with all aspects of their financial well-being. Our goal is to implement customized financial plans that preserve and maximize your wealth management needs. Schedule an appointment here or call (727) 799-1701 for more information