Here's the secret to having a better financial year in 2021: Don't be so focused on what you missed out on in 2020 that you fail to see the opportunities right in front of you.

For example, if you didn't have a chance to contribute as much as you wanted to your retirement accounts last year, you have a chance to make up for it. If your finances allow it, you can still contribute five-figures to a Roth IRA, and benefit later from the tax-free income you'll generate.

Glass jar used for saving US dollar bills and notes for IRA retirement fund.


The power of the Roth IRA 

It's often tempting to put off saving for retirement until later in life. But here's the truth: The longer you wait, the harder you'll have to work to accumulate enough of a nest egg to fund the lifestyle you're hoping for. 

If you don't already have a Roth IRA (individual retirement account), find out if you meet the qualifications to open one. It's probably one of the greatest tax-free presents that retirement savers get to unwrap.

Anyone who has earned income for the year and falls below the annual income thresholds can contribute to one. Even your 12-year-old who gets paid to mow the lawn can take advantage of a Roth IRA

Your contributions are made with money you've already paid taxes on. You can invest those funds in whatever assets you like, and when you withdraw the proceeds during retirement, you'll enjoy 100% of the profits you've earned from them. No need to worry about a big tax bill later with a Roth. 

Nor do the Roth IRA rules require you to do any complex calculations. You can touch any or all of the earnings in your account without paying taxes as long as you've met the five-year rule and are over 59 1/2 when you withdraw the money. (There are also exceptions to the rules that allow you to make use of some of your earnings before retirement.)

The clock is ticking 

Best of all for those who might have fallen behind schedule in 2020, the deadline to make contributions to a Roth IRA for a given calendar year is not Dec. 31. The IRS gives us extra time to max out our contributions by making that deadline the same one as the date by which we have to file our tax returns. So you can stash some extra cash in your Roth IRA until April 15, 2021, and still count it toward last year's cap.

If, for example, you only contributed $4,000 to your Roth IRA in calendar 2020, you still have time to add $2,000 more, which would max out your contributions, or $3,000 if you're 50 or older. (The annual contribution limit increases by $1,000 once you hit 50. But whatever your age, if your income lands within certain ranges, you may only be eligible to contribute a fraction of that amount.)

Double up on contributions  

Let's say you didn't contribute anything to a Roth IRA in calendar 2020. You can fund your account for last year with $6,000 before the tax filing deadline. But at the same time, you can make another $6,000 contribution for 2021 right now, expediting your retirement savings efforts.

If you have been letting your retirement savings slide, this is the best time to get back on track, because you could in one move contribute $12,000 to a tax-advantaged account and give your long-term plan a major boost.

Putting money into a Roth IRA does not mean you won't be able to tap into those funds prior to retirement if you must. Investors do have the option of withdrawing money from the accounts before they turn 59 1/2. You can always withdraw the amount you have contributed to your Roth IRA without worrying about taxes or penalties. You'll just need to remember that once you take money out, you can't put it back in later as replacement funds. You are still subject to the annual contribution limits.  

No turning back 

If you miss out on contributing to a Roth IRA for 2020 before April 15, you won't be able to turn back the hands of time and make up for it later, so don't wait. Every penny you save and invest will increase your chances of hitting your retirement savings goals and giving yourself the lifestyle you desire in your golden years.