It's a pretty common story: You make a New Year's resolution to max out your IRA -- and then life happens. Before you know it, you're a few weeks off of the holiday season and your IRA balance looks pretty much the same as it did the year before.
It can be frustrating, but that doesn't mean you should just give up and try again next year. You still have plenty of time left to set aside money in your IRA for 2023. Here are three tips to help you do it.
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1. Budget what you can
It can be tough around the holidays when you have extra expenses, but if you can, try to earmark some money for your IRA each pay period. If your goal is to max out your IRA, you'll have to subtract the amount you've already contributed from the annual contribution limit for 2023 -- $6,500 for adults under 50 and $7,500 for adults 50 and older. Then, divide the remainder by the number of pay periods you have left.
For example, if you're under 50 and have set aside $3,500 so far, you still have $3,000 to go. Assuming you get paid every other week, you'd have to set aside about $500 from each paycheck to reach your goal by the end of the year.
But even if you aren't able to max out your account, set aside what you can. This will help you be more prepared for retirement, and it could earn you a tax break if you qualify for the Savers Tax Credit or contribute to a traditional, tax-deferred IRA.
2. Use any extra cash
The end of the year can bring additional sources of income as well as additional expenses. You might get an end-of-year bonus from your job. Or maybe you get some cash from a family member for the holidays. Go ahead and put that money into your IRA if you want.
Unlike 401(k)s, which require you to withhold money from a paycheck, IRAs allow for one-time contributions as you're able to make them. So it's perfectly fine to contribute money more sporadically if you can't adhere to a strict schedule.
3. Make a prior-year contribution
It's probably easiest to max out your IRA before Dec. 31, 2023, but it's actually not a requirement. IRAs enable you to make prior-year contributions as long as you do so before you file your taxes for 2023. So if you expect to have some extra cash in early 2024, you could wait until then to set aside the funds.
The process for making prior-year contributions is pretty similar to making current-year contributions. However, some IRA providers may default to current-year contributions. So if you want your contributions to count for 2023 instead of 2024, you should probably reach out to your broker to ensure it applies the funds correctly. Otherwise, you could run into a mess with the IRS when you file your taxes.
There's always next year
You may not be able to max out your IRA this year even if you try all the tips above, and that's OK. All you can do is your best. If you were only able to set aside $1,000 or even less, be proud of that. It's better than setting aside nothing at all. Just do what you can and try to improve next year if your circumstances enable you to do so.
