Even if you don’t have access to a workplace 401(k) or if you decide not to use your employer-sponsored retirement account, an individual retirement account (IRA) provides the opportunity to claim tax benefits for retirement savings.
In 2021, you can make a contribution of up to $6,000 to a regular or Roth IRA. Additionally, if you are 50 or older, you can contribute an additional $1,000 catch-up contribution, for a total investment of $7,000 dollars.
If you haven’t yet reached the maximum contribution limit on your 2021 IRA, you might be thinking that you’re running out of time to make contributions to your retirement account for the current tax year.
However, the good news is that this is not the case. You can really continue working on your 2021 IRA contributions until the end of 2022. The reason behind this is as follows.
The deadline for making IRA contributions in 2021 does not end with the calendar year.
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It is not necessary to make contributions to your 401(k) before the end of the calendar year in order to invest in your regular or Roth IRA.
Instead, you can continue to make 2021 contributions to this account until the deadline for submitting your tax returns for the current year is reached. For the majority of people, that will be April 18, 2022.
In other words, even after you ring in the new year, you could have three and a half more months to devote to increasing your contribution to the maximum.
If you’ve fallen behind on your 2021 IRA contributions, the ability to continue working towards your goal even in 2022 is fantastic news.
The chance to make standard or Roth IRA contributions for the current tax year is lost permanently after the deadline for doing so has passed. As a result, you will miss out on the subsidies that the government intends to provide to assist you in building your retirement savings.
You don’t want to miss out on this opportunity to enlist Uncle Sam’s assistance in saving for your retirement. If you have extra time to use up all of your credits, you may not be required to do so.
How to Reach the Maximum Amount of your 2021 IRA in 2022
If you want to ensure that you receive the most amount of tax benefits for the 2021 tax year, the easiest method to do it is to find out how far you are from reaching your IRA contribution limits and how much you should contribute each month before the April or October deadline.
If you have made no contributions and want to reach the $6,000 contribution limit for the year, you would need to make investments of $1,500 per month in the months of January, February, March, and April.
Set up monthly automatic transfers from your bank account to your brokerage account in order to reach your target each month. Rework your budget in order to come as near as feasible to those required monthly contributions.
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It is possible to increase your financial stability in your later years by taking the necessary precautions now. And you’ll be glad you took use of the extra time to take advantage of the resources available to assist you in building the nest egg you need for the future.
