03/02/2024
It's not too late to take advantage of 2023 contributions! As a general rule, you have until tax day to make IRA contributions for the prior year. You can contribute up to the maximum annual limit of $6,500 for 2023 and $7,000 for 2024 across all IRAs, but you must have earned income.
If you're still struggling to decide which IRA is right for you and you're eligible for both, the key difference comes down to taxes. With a Roth IRA, you pay taxes upfront, but your money grows tax-free over time, meaning you don't owe any taxes on investment gains when you withdraw during retirement. This is ideal for people who expect their income tax rate to be higher in retirement or those who want tax-free flexibility. On the other hand, a Traditional IRA gives you a tax break now but requires you to pay taxes on both the original contributions and the investment gains when you withdraw during retirement. This is ideal for people who want to reduce their current taxable income or anticipate a lower tax rate in retirement.
A little bit about eligibility:
For Roth IRAs, an income limit applies to determine who is eligible to make contributions. For Traditional IRAs, no income limit applies to determine who is eligible. However, with a Traditional IRA, your income does affect whether you can deduct your contributions from your taxable income for the year if you are also covered by a retirement plan at work.
DM me if you have any IRA questions or need help setting up your account!
