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There’s an old adage about saving and investing: The best time to start was yesterday. The second best is today. Well, when it comes to your IRA, you can do both. Here’s how. Unlike employer-provided retirement accounts like 401(k)s, IRAs are individual retirement arrangements, so in a sense, the timing is between you and the IRS. Since you don’t file your 2024 taxes until 2025, you actually get until the filing deadline — April 15 — to make 2024 contributions. You can even start an IRA now for 2024. But why would you want to mark any of your contributions down for 2024 versus 2025? A few reasons. First off, there are annual limits to what you can save in any tax-advantaged retirement account. For IRAs, the cap for both 2024 and 2025 is $7,000 each year, or $8,000 if you’re 50 or older. That means anything you can mark as a 2024 IRA contribution frees up more room to save toward this year’s limits. Second, if you have a traditional IRA, you may be able to deduct those 2024 contributions from your income, lowering your tax burden. Your contributions are fully deductible unless you or a spouse are covered by a retirement plan at work and you earn over a certain amount. (If you’ve already filed your 2024 tax return, you can amend it.) Third, IRAs and other long-term investment vehicles let you leverage the power of compound growth, giving your contributions and any earnings from those contributions time to grow. If, for example, you saved $7,000 a year for 20 years and your investments had a 6% annual return, you’d end up with about $257,000, including earnings of roughly $117,000. Not too shabby. (If you have or open an IRA with SoFi, you’ll also get a nice little reward — a 1% match on contributions made by April 15.) So what? Maximizing tax-advantaged retirement accounts is one of the best ways to save for your future. And over half of Americans worry they won’t have enough saved by their retirement, according to the National Institute on Retirement Security. If your employer offers a 401(k) plan with matching contributions, it’s best to save there first. You can set aside a lot more, and the match is free money. Otherwise, an IRA offers many of the same benefits, but with more flexible timing.Related Reading
• How to Choose an IRA Provider (Experian)
• Types of Retirement Plans and Which to Consider (SoFi)
• Can Americans Be Saving Too Much for Retirement? (NewsNation)
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