There’s still time to contribute to your IRA
The Internal Revenue Service recently announced that individuals have until May 17, 2021 to meet certain deadlines that would normally fall on April 15, including making IRA contributions. This news coupled with recent changes to contribution rules make this the perfect time to take advantage of an Individual Retirement Account (IRA).
There are two main types of IRAs, and the contribution limits are the same for both:
- With traditional IRAs, your contributions may be tax deductible and you defer paying taxes until you withdraw the money in retirement.
- Roth IRA contributions are not tax deductible, and you pay taxes on the money upfront.
In 2019 contribution limits were increased to a maximum of $6,000, up from $5,500 in 2018. If you are 50 or older, you can take advantage of a catch-up provision, letting you contribute an additional $1,000 — for $7,000 in total. Those limits apply to the 2020 and 2021 tax years, too.
Although you can contribute to a Roth IRA at any age, 2020 is the first year you can add money to a traditional IRA past the age of 70 1/2, thanks to the SECURE Act, passed in December 2019. You have up until May 17, 2021, to make your contributions to Roth or traditional IRAs.
If you have questions about IRAs, the experts at Washington Trust can help. Just call 800-475-2265 to speak to an IRA specialist today.