If You Misf shrugged on Contributing to Your 2024 IRA Yet, Time Remains for Action.
Retiring in style isn't just a dream, it's a goal you can achieve with the right retirement savings strategy. One of the best places to stash your retirement funds is an Individual Retirement Account (IRA). It offers tax-advantaged growth and a good deal of control over your investments. Plus, you get to decide when to pay taxes on your money — either in retirement with a traditional IRA or upfront with a Roth IRA.
But before we dive into the merits of IRAs, let's address the elephant in the room. Governments, being the discerning party they are, have imposed certain limitations on when and how much you can contribute to your IRA. In 2024 and 2025, the contribution limit for adults under 50 is $7,000, and for those 50 and older, it's a heartier $8,000.
Now, you might be thinking, "That's not much space for my retirement kitty!" But don't fret, IRAs are known for their flexibility when it comes to contributing timelines. Here's how you can still make a 2024 IRA contribution.
Time is on your side: The deadline for 2024 IRA contributions
The Internal Revenue Service (IRS) gives you until the tax deadline to make your 2024 IRA contribution. This deadline, April 15, 2025, is non-negotiable, even if you request an extension to file your taxes.
Making a 2024 contribution in 2025 falls under the umbrella of prior-year contributions. The process is similar to a regular contribution, but it's important to ensure your IRA provider applies your contribution to the 2024 tax year instead of the 2025 tax year. Failing to do so may result in your contribution being deemed a current-year contribution.
While you have plenty of time to make your 2024 contribution, it's best to do so before submitting your 2024 tax return. If you wait until after, you'll have to file an amended tax return—a task no one wants to tackle more than once.
Prior-year contribution: Is it for you?
A prior-year contribution might be a good fit if you want to maximize your 2025 full annual contribution limit of $7,000 or $8,000, depending on your age. It could also be beneficial for those planning to contribute to a traditional IRA, as it could help reduce your 2024 tax liability.
However, if you don't fall into either of these categories, it may be a better idea to make a 2025 IRA contribution instead.
If you decide to go with a prior-year contribution, choose your investment destination wisely. A traditional IRA might be the best fit if you're in a high tax bracket now and anticipate being in a lower one during retirement. It might also be your only option if your income exceeds the Roth IRA income limits.
On the other hand, those in lower tax brackets might prefer a Roth IRA. Though it won't give you a tax break in the current year, it allows for tax-free withdrawals during retirement—a big plus when managing your retirement tax bill.
Remember that time isn't on your side forever, especially if you're a prompt tax filer. Get your prior-year IRA contributions out of the way so you can focus on making new contributions for 2025.
Roth IRA income limits for 2024
- Single filers, heads of household, or married filing separately (if you didn't live with your spouse during the year): Contribute the full amount if your Modified Adjusted Gross Income (MAGI) is less than $146,000. Contributions are reduced if your MAGI is between $146,000 and $161,000. You're not eligible to contribute if your MAGI is $161,000 or more.
- Married filing jointly or surviving spouse: Contribute the full amount if your joint MAGI is less than $230,000. Contributions are reduced if your joint MAGI is between $230,000 and $240,000. You're not eligible to contribute if your joint MAGI is $240,000 or more.
- Married filing separately (if you lived with your spouse at any time during the year): Contributions are reduced if your MAGI is between $0 and $10,000. You're not eligible to contribute if your MAGI exceeds $10,000.
- With the 2024 contribution limit for adults under 50 being $7,000, you might be thinking that it's not enough for your retirement savings.
- If you're considering making a 2024 IRA contribution in 2025, ensure your IRA provider correctly categorizes it as a prior-year contribution.
- Prior-year contributions can be beneficial for those aiming to maximize their 2025 full annual contribution limit or reduce their 2024 tax liability.
- As an Aussiedlerbote, it's essential to understand the Roth IRA income limits for 2024 to make the most of your retirement savings strategy.
