Month: April 2019

You’ve got 10 days. This is your warning.

April 15th…     Aside from being the tax filing deadline, its also the deadline to complete your 2018 IRA contributions. Why is this important? Its a use-it-or lose it system and is time sensitive. The IRS only lets you contribute a certain amount of dollars each year to an IRA (Individual Retirement Account). For 2018, that amount is $5,500. Once April 15th passes, you’ll never be able to contribute for 2018 again. EVER! You’ve got one shot.

Check whether or not you can contribute to a Roth IRA directly (income limits apply) or if you’ll need to contribute to an IRA and then convert the assets to a Roth IRA (sounds harder than it really is.)

Why contribute at all? Why is this a benefit to you? The simple fact that the government limits your annual contribution should tell you all you need to know. People would be contributing much, much more if they could. But why??  Three words:

Tax-free growth.  Is that two or three? I don’t know. Doesn’t matter…. you want it!

If you contribute $5,500 to a Roth IRA in 2018 and those funds grow to $100,000 by the time you’re 60, you can withdraw all of that money tax-free. It also grows tax-free, so when you buy/sell within the account, you aren’t taxed on gains.  The same can’t be said for many other account types.

Maxing out your IRA contributions (whether in a Roth IRA or Traditional IRA) each year is perhaps one of the biggest no-brainers, especially when you’re young. If you really get in a pinch and need the funds, you can withdraw your contributions penalty-free. The only penalty is that you can’t go back and add more for a previous year. Time is a powerful thing, you want it working for you, not against you!

Once you make the contribution (or maybe you already have) then you’ll need to decide how it is invested. Leaving it sitting in cash won’t produce any growth. That will be an article for another day, or just reach out for my 2-cents. The main thing in the next 10 days is to get your 2018 contribution taken care of ASAP before you’re on to 2019.