As the April 15th deadline to finish making your 2024 IRA contributions quickly approaches, now is the perfect time to step back and take stock of your retirement savings plan.
Whether you want to maximize your contributions, take advantage of tax-saving strategies, or simply get into the habit of consistent saving, April 15th is the deadline for 2024 IRA contributions. Below, you’ll find more information on what your options are to maximize your retirement savings this year.
Understanding the IRA Contribution Limits
For 2024, individuals can contribute up to $7,000 to an IRA. If you’re 50 or older, you can add an additional $1,000 “catch-up” contribution, bringing your total to $8,000. This applies to both Traditional and Roth IRAs, though there are some eligibility factors to consider:
Income limits can affect your ability to deduct contributions to a Traditional IRA or make contributions to a Roth IRA.
Employer-sponsored retirement plans may impact the deductibility of your contribution.
A backdoor Roth strategy might be an option for higher-income earners.
If your income exceeds the deductible IRA limits, you could perform a backdoor Roth contribution by making a non-deductible IRA contribution and immediately converting it to a Roth IRA. However, this move has tax implications if you have other pre-tax IRA assets.
The IRA contribution limits for 2025 are the same as they were in 2024.
Avoiding Last-Minute Lump Sum Contributions
Instead of waiting until the last minute to make lump sum IRA contributions for the previous year, consider automating your contributions to occur consistently throughout the year. Just like a 401(k) deduction, setting up automated IRA contributions ensures consistency and removes the stress of a lump-sum payment. Here’s how some of our clients do it:
Every paycheck: Contribute a set amount every two weeks to align with your pay schedule.
Monthly deposits: Set up a recurring monthly contribution to make saving more manageable.
Direct from payroll: Some clients arrange for IRA contributions to be made straight from their paycheck to their IRA.As one client put it, “It’s great because it never hits my bank account, so I never feel like it’s money I had to spend.”
Don't Forget Your Spouse’s IRA
If you’re married and one spouse has little to no earned income, you can still make an IRA contribution on their behalf. This can effectively double the amount you’re able to save for retirement as a household.
What’s Next?
With the April 15th deadline approaching, now is the time to act. If you haven’t maximized your 2024 contribution yet and have the funds available, making a contribution before the deadline ensures you’re taking full advantage of the 2024 contribution. If you do not have the lump sum available, consider implementing a plan to systematically save for 2025 and future years to make the process smoother and more manageable from here on out.
Retirement savings is a marathon, not a sprint. Taking small, consistent steps now will put you in a much stronger position down the road. If you have questions about which strategy is best for your situation or need help setting up contributions, reach out. We’d be glad to help guide you through the process.