Roth IRA Contribution Deadlines; Details to Keep in Mind

Tax season looms over many households as we enter the final weeks of winter; for some, it’s something to fear and dread each year, and for others, it’s nothing but procedure. A pattern I’ve noticed with my clients goes as so; when we start working together, tax season is, at the very least, something they aren’t very confident in handling, and by the end of our first year, the confidence and even enthusiasm are present.

You may be asking yourself, “Enthusiasm? For taxes? What are you, crazy!?” Think of it this way; do you know the relief you feel when you finally conquer that nagging challenge? Like, when you can finally ski down the mountain without falling, or you can finally get some relief from an achy tooth? That’s the way some of my clients feel when they realize there are strategies and tactics they can use to potentially save money, not just in the present but also in the long run.

Remember, taxes aren’t a one-and-done go-around, and we’ve got to deal with them for most of our lives. An accountant typically saves you taxes in the current year, and I think about the lifetime tax burden. Over the course of an investor’s life, they can save hundreds of thousands in taxes by making smart decisions with investments and retirement accounts.

In this article, I will cover some key details to keep in mind regarding Roth IRA contribution deadlines and how being attentive and goal-focused can work well in your favor.

See my bullet points below; this holistic overview will provide some key dates to keep at the top of your mind and the important Roth IRA contribution deadlines to meet.

General 2022 Filing Guidelines

This is somewhat of a no-brainer, but the earlier you start filing your taxes, the better. The IRS continuously faces staffing shortages, and it’s better to file with them sooner rather than later, especially with more demanding and complicated filing circumstances.

Extensions are available; for most taxpayers this year, the filing deadline is April 18. However, automatic filing extension measures are in place, and it’s free to request an extension.

Tax Diversification? Tax Advantages with Roth IRAs, Even for High-Income Earners? Check Out My Video to Learn More!

Roth IRA Contribution Deadlines and Details to Keep in Mind

You can contribute to your Roth IRA for the current tax year until the tax filing deadline, which is in the spring – April 18th, 2023.

For 2022, the contribution limit for Roth IRA accounts is $6,000 for individuals under age 50 and $7,000 for those aged 50 or older. These numbers tend to increase each fiscal year incrementally to account for economic considerations such as wages, inflation, etc.

Single filers with modified adjusted gross incomes (MAGIs) of $140,000 or more, and joint filers with MAGIs of $208,000 or more are not eligible to contribute to a Roth IRA.

Be clear about which tax year you’re making contributions to; some financial institutions may automatically apply your contribution to the current tax year, which is a huge frustration if it happens! So, it’s important to be clear about which tax year the contribution should be applied to.

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Roth IRAs – Young Families Can Benefit Greatly.

I’ve covered Roth IRA benefits many times before with my articles, but it doesn’t mean the themes are not worth revisiting. Remember, Roth IRA contributions are made with after-tax dollars, and qualified withdrawals of earnings from the account are tax-free; this is one of the biggest selling points regarding Roth IRAs.

Young families who expect to be in a higher tax bracket in retirement may keep their Roth portion of retirement savings growing without concern about how potentially higher taxes in the future will impact them. Also, in addition to both earnings on the account and withdrawals after age 59 ½ being tax-free, your contributions can be withdrawn without penalty (although not recommended) for any unexpected expenses along the way to retirement.

When considering Roth IRAs, there’s a simple philosophy I’m promoting here; pay tax on the seed, not on the harvest.

If you’ve got tax-related concerns, retirement planning questions, or want to chat about the moves the Patriots are making in the off-season, please reach out. As a family financial planner, I’m pleased to help families set the time-tested course for their retirement.

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A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.