MERIDIAN — Provided by Gerry Mitchell, CFP®, AAMS®
Financially, many of us associate April with taxes – but we should also associate April with important IRA deadlines.
*April 1 is the absolute deadline to take an initial IRA Required Mandatory Distribution (RMD).
*April 15 is the deadline for making annual contributions to a traditional or Roth IRA.
Let’s discuss the contribution deadline first, and then the deadline for that first RMD (which affects only those IRA owners who turned 70½ last year).
The earlier you make your annual IRA contribution, the better. You can make a yearly Roth or traditional IRA contribution anytime between January 1 of the current year and April 15 of the next year. For example, you can make your IRA contribution for 2014 anytime from January 1, 2014-April 15, 2015. The IRA contribution window for 2013 is January 1, 2013- April 15, 2014.
So you have more than 15 months to make your IRA contribution for a given year. But why wait? Savvy IRA owners pour new money into their accounts each January – as early as they can – to give those dollars more months to grow and compound. (After all, who wants less time to amass retirement savings?)
You cut your income tax bill by contributing to a deductible traditional IRA. That’s because you are funding it with after-tax dollars. To get the full tax deduction for a 2014 traditional IRA contribution, you have to meet one or more of these financial conditions:
*You aren’t eligible to participate in a workplace retirement plan.
*You are eligible to participate in a workplace retirement plan, but you are a single filer with adjusted gross income of $59,000 or less. (Or if you file jointly with your spouse, your combined AGI is $95,000 or less.)
*You aren’t eligible to participate in a workplace retirement plan, but your spouse is eligible and your combined 2014 gross income is $178,000 or less.