This Simple Move Could Help You Max Out Your 2023 IRA

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  • Maxing out your IRA could lower your near-term tax burden while helping you build a solid nest egg.
  • If you've struggled to max out in the past, here's one change to consider in the new year.
  • Automate your retirement savings to meet your 2023 IRA goal.

It's an easy step worth taking.

There's a reason savers are often advised to max out an IRA account if possible. The more money you put into one of these accounts, the more of a nest egg you stand to retire with. 

That's important, because many seniors who get most or all of their retirement income from Social Security struggle to make ends meet. If you enter retirement with a robust nest egg, you'll have fewer financial concerns at a time when you're supposed to be enjoying life, not stressing your way through it.

But that's not the only reason it pays to max out an IRA. If you have a traditional IRA, not a Roth IRA, the money you put in serves as an immediate tax break. So if you put $1,000 into your traditional IRA, for example, that's $1,000 of earnings the IRS won't tax you on. 

Of course, not everyone can max out an IRA. If you're struggling with inflation and barely have enough money to pay your bills, then IRA contributions may have to wait.

But if you're in a decent place financially, then maxing out an IRA may be possible -- and it may boil down to discipline more so than anything else. And if you've struggled in that department in the past, one simple move could help you max out your account in 2023.

Put the process on autopilot

People who save in their employers' 401(k) plans have their contributions deducted from their earnings automatically. That's a good thing, because it effectively forces them to save that money. Someone who commits to a $3,000 contribution to their 401(k) for 2023, for example, will have $250 a month taken out of their paychecks before they can touch it.

IRAs often work differently. Since IRAs aren't tied to an employer, you have to arrange for your contributions to land in your account yourself. 

Now, what some people will do is see how much they spend in a given month and then move money into an IRA. But if you want to max out your IRA in 2023, then a better bet may be to set up an automatic transfer. 

In 2023, the maximum you can put into an IRA is $6,500 if you're under age 50 or $7,500 if you're 50 or older. So, let's say you're 35 and really want to hit that $6,500 max. That will require you to contribute about $542 a month. 

In that case, if you arrange for $542 to leave your checking account each month and land in your IRA, you won't be tempted to spend that $542. And that could be the difference between meeting your goal and falling short.

Don't leave things to chance

If you take the attitude that you'll do your best to contribute to your IRA after you've paid all of your bills, you might struggle to max out in 2023. So instead, prioritize your contributions and then spend your money. 

Now, you may find that once your checking account balance shrinks each month due to those automatic IRA transfers, you'll need to cut back on some non-essential spending. But that's something worth doing if it buys you a much more comfortable retirement down the line.

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