Worried You Won't Max Out Your IRA by December 31? Here's Why You Shouldn't Sweat It

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  • IRAs max out this year at $6,000 for savers under 50 and $7,000 for those 50 and older.
  • Contributing the maximum allowable amount could work to your benefit, but you shouldn't stress if you can't finish funding your account this year.
  • You have until tax time (April 2023) to finish funding it.

Don't flip out if you can't meet that deadline.

You'll often hear that it's a great idea to max out your IRA every year if you're able to do so. First of all, the more money you put into that account, the more you might have on hand during retirement. And that's important, because while many retirees collect a monthly paycheck from Social Security, those benefits often aren't enough for recipients to cover their living costs in full.

Secondly, the more money you put into a traditional IRA, the less money the IRS will tax you on. Now, Roth IRAs work differently -- those are funded with after-tax dollars, and while they offer many benefits, they won't give you an upfront tax break. But a traditional IRA will.

How much you can contribute

The maximum allowable IRA contribution this year (for both traditional and Roth accounts) is $6,000 if you're under the age of 50. If you're 50 or older, you can make a $1,000 catch-up contribution in your IRA, bringing your total for the year to $7,000. And as a point of clarification, you don't need to be "behind" on retirement savings to make your catch-up. You simply need to have reached the age of 50.

If your goal is to max out your IRA this year, then ideally, you'll have gotten pretty close at this point. After all, we're almost done with 2022. But what if you're not close to that point? What if you're 30 years old and have only put $3,000 into your IRA so far? That means you still have another $3,000 to go to max out.

Before you fall into panic mode, worry not. Unlike 401(k) plans, IRAs let you make contributions even after the calendar year is over. So you don't have to worry if you don't finish funding your 2022 IRA by Dec. 31.

Take advantage of that extra time

If you want a 401(k) plan contribution to count for 2022, then that money needs to be in your account by Dec. 31. But IRAs work differently.

You have until the following year's tax-filing deadline to make your IRA contributions and have them count for a given year. This means you have until April of 2023 to finish funding your 2022 IRA. That gives you several extra months to come up with that money.

Of course, it's generally a good idea to finish contributing to your IRA by the end of the year. That way, once a new year begins, you can focus your efforts on funding that year's IRA.

But this year, a lot of people got tripped up by inflation and had to hit pause on IRA contributions. And so you may need more time to finish maxing out your account for 2022. If that's the case, don't stress yourself out needlessly when you can still make contributions well into 2022.

Do your best

Maybe you can't max out your IRA contributions for 2022. If so, that's okay. You don't have to max out every year, and if you can't in 2022, just put as much money into your IRA as you're able to.

It's been a really hard year due to inflation. And prioritizing your near-term financial needs over your long-term savings makes sense.

In fact, if your emergency fund needs work, you should hold off on contributing to your IRA and put more money into your savings account instead. Forgoing that tax break may be frustrating. But you're better off prioritizing your immediate needs and ramping up your IRA contributions once your financial situation improves.

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