How can you plan ahead to ensure you maximize your IRA contributions this year?
Maxing out contributions to your IRA or other retirement account(s) may seem like a large amount of money to set aside when the IRS first releases the annual limits each year, but finding a way to maximize your tax-advantaged savings is an important step in building a better financial future for you and your family.
Depending on your investment strategy, your retirement account will ideally grow over time, turning that initial contribution into a higher dollar amount. When using a self-directed IRA, your investment strategy can include both traditional assets and alternative assets such as real estate, promissory notes, private equity, and more to potentially diversify your portfolio.
Imagine what your retirement account contributions could look like by the time you retire. Could they be worth the sacrifice of saving now?
Consider using a calculator to estimate the power of compounding interest.
You might be wondering, “How can I maximize my contributions to potentially receive tax deductions next year or save on taxes in the future?”
Retirement planning and saving is a long journey. When you envision the amount you need, it might seem like an unattainable goal, especially if you feel like you had a late start.
However, if you break it down and set manageable goals, your journey might be a little easier. By setting a goal for the year, then breaking it down by month or even by week, your goal becomes less challenging and could help you contribute the maximum amount to your retirement account this year.
Video: Considering a Roth IRA This Tax Season?
Maximizing IRA Contributions: Breaking it Down
Getting into the specifics, if you’re under the age of 50, the standard limit for Traditional and Roth IRA contributions for 2024 is $7,000. The catch-up limit if you are 50 or older for Traditional and Roth IRA contributions is up to $8,000.
If you contribute to a Traditional IRA, your contributions can be potentially tax-deductible for the year.
If you contribute to a Roth IRA, your contributions are not tax-deductible, but grow in a tax-free environment.
If your goal is to maximize your contributions this year, you can follow our contribution challenge tracker for both a Traditional and Roth IRA.
You have the option to contribute for 2024 until April 15, 2025, meaning you could start as late as April this year and, following the tracker, still potentially maximize your contributions for the year.
Individual Investor Under 50
Individual Investor 50 or Older
Month 1
$620 (Total Contribution: $620)
$685 (Total Contribution: $685)
Month 2
$580 ($1,200)
$665 ($1,350)
Month 3
$580 ($1,780)
$665 ($2,015)
Month 4
$580 ($2,360)
$665 ($2,680)
Month 5
$580 ($2,940)
$665 (3,345)
Month 6
$580 ($3,520)
$665 ($4,010)
Month 7
$580 ($4,100)
$665 ($4,675)
Month 8
$580 ($4,680)
$665 ($5,340)
Month 9
$580 ($5,260)
$665 ($6,005)
Month 10
$580 ($5,840)
$665 ($6,670)
Month 11
$580 ($6,420)
$665 ($7,335)
Month 12
$580 ($7,000)
$665 ($8,000)
If you’re under the age of 50, you have to save approximately $19.18 per day to reach the $7,000 contribution limit. If you’re over the age of 50, you have to save about $21.92 per day to reach the $8,000 contribution limit.
Additional Tax-Advantaged Contributions: Adding a Health Savings Account
In addition to contributing to IRAs, some individuals also have the option to make tax-advantaged contributions to an HSA, or Health Savings Account. In order to qualify for an HSA, you must be enrolled in a high deductible health plan (HDHP).
If you’re an individual under the age of 55 and qualify for an HSA, you can contribute $4,150 to your HSA for 2024. If you’re an individual age 55 or older and you qualify, you can contribute $5,150.
Are you interested in potentially maximizing your contributions to your IRA and an HSA?
The contribution tracker goes as follows:
Individual Investor Under 50
Individual Investor 50 to 54
Individual Investor 55 or Older
Month 1
$355 to an HSA+$560 to an IRA = $915
(Total Contribution: $915)
$355 to an HSA +$685 to an IRA = $1,040
(Total Contribution: $1,040)
$442 to an HSA + $685 to an IRA = $1,127
(Total Contribution: $1,127)
Month 2
$345+$540=$885 ($1,800)
$345+$665=$1,010 ($2,050)
$428+$665=$1,093 ($2,220)
Month 3
$345+$540=$885 ($2,685)
$345+$665=$1,010 ($3,060)
$428+$665=$1,093 ($3,313)
Month 4
$345+$540=$885 ($3,570)
$345+$665=$1,010 ($4,070)
$428+$665=$1,093 ($4,406)
Month 5
$345+$540=$885 ($4,455)
$345+$665=$1,010 ($5,080)
$428+$665=$1,093 ($5,499)
Month 6
$345+$540=$885 ($5,340)
$345+$665=$1,010 ($6,090)
$428+$665=$1,093 ($6,592)
Month 7
$345+$540 =$885 ($6,225)
$345+$665=$1,010 ($7,100)
$428+$665=$1,093 ($7,685)
Month 8
$345+$540=$885 ($7,110)
$345+$665=$1,010 ($8,110)
$428+$665=$1,093 ($8,778)
Month 9
$345+$540=$885 ($7,995)
$345+$665=$1,010 ($9,120)
$428+$665=$1,093 ($9,871)
Month 10
$345+$540=$885 ($8,880)
$345+$665=$1,010 ($10,130)
$428+$665=$1,093 ($10,964)
Month 11
$345+$540=$885 ($9,765)
$345+$665=$1,010 ($11,140)
$428+$665=$1,093 ($12,057)
Month 12
$345+$540=$885 ($10,650)
$345+$665=$1,010 ($12,150)
$428+$665=$1,093 ($13,150)
About $29.18 per day
About $33.29 per day
About $36.03 per day
Even if completely maxing out your contributions by the end of the year isn’t your goal, remember that any amount you contribute and save this year will bring you one step closer to your overall financial goals and one step closer to building tax-advantaged wealth, whether you have a Traditional IRA, Roth IRA, Health Savings Account, or all three.
Want to learn more about a self-directed IRA, HSA, or other account? We’re here to help. Set up a consultation with an Equity Trust Senior Account Executive today.
Equity Trust is a directed custodian and does not provide tax, legal or investment advice. Any information communicated by Equity Trust is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional.
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