An individual retirement account, or IRA, can be a fantastic retirement savings tool. However, there are contribution limits and deadlines, and too many Americans scramble to get their IRA contributions in at the last minute.

The problem is that it can be extremely burdensome to come up with thousands of dollars to contribute at once. So, here's a quick guide that can help you spread out your contributions throughout 2020 in the most efficient way possible -- by setting aside an equal amount from every paycheck.

Pay stub with pen on top.

Image source: Getty Images.

The 2020 IRA contribution limit and deadline

For 2020, the IRA contribution limit is the same as it was in 2019. IRA owners can contribute a maximum of $6,000 for the year, and savers who are 50 or older can contribute another $1,000 for a total contribution of $7,000.

This limit is per person, not per account. In other words, if you have multiple IRAs -- say, a traditional and a Roth -- your total contributions for the year cannot exceed your limit.

In order to contribute to an IRA, you need to have earned income for the tax year, and you also may need to qualify with income limitations, depending on the type of IRA you choose and whether you have an employer-sponsored retirement plan at work.

The contribution deadline for IRAs is the tax deadline for the calendar year. In other words, you can make 2019 IRA contributions until April 15, 2020, and you have until April 15, 2021 to get in your 2020 IRA contributions. Now, the whole point of this article is that it isn't a good idea to wait until the deadlines, but it's important to know them. If you haven't made a 2019 contribution yet, you can effectively make two years' worth of IRA contributions in 2020, as long as you get half of it in before Tax Day.

How much do you need to save per paycheck to max out?

The most efficient way for most Americans to make their IRA contributions is to spread it out evenly throughout the calendar year. After all, it can be far easier to come up with $115 per week than $6,000 all at once.

Historically, one big advantage to contributing all at once has been that you could invest in stocks and funds more efficiently -- in other words, you would pay trading commissions just once per year instead of over and over. However, in 2019 most major online brokers got rid of stock trading commissions, so this took away the main advantage of lump-sum contributions.

The easiest way to do this is to contribute an equal amount from each paycheck. So, here's a quick guide to help determine your per-paycheck contribution amount, depending on how frequently you get paid.

Paycheck Frequency

If You're Under 50...

If You're 50 or Older...













Data Source: Author's own calculations. Amounts are rounded down to the nearest cent.

To take this a step further, it's also a smart idea to automate the process. In other words, set up an automatic transfer for the amount in the chart from your bank account to your IRA for every time you get paid.

Why you should max out your IRA every year

For starters, maxing out your IRA has some great tax benefits. If you're in the 22% tax bracket and contribute $6,000 to a traditional IRA in 2020, you can cut your tax bill by $1,320. If you contribute to a Roth IRA, your contributions are setting you up for tax-free income after you retire.

Having said that, the primary reason to contribute as much as you can to an IRA is to set yourself up for a worry-free retirement. Social Security itself isn't likely to be enough to live comfortably and is only designed to replace about 40% of the average American's income. A $6,000 annual contribution invested at a historically conservative 7% annualized rate of return could grow to over $560,000 after 30 years, and that's assuming that the annual maximum stays constant, while in reality it is adjusted upward with inflation over time. The bottom line is that maxing out your IRA gets you a fantastic combination of tax breaks and the peace of mind that comes with a retirement nest egg.