The government has given us all an easy way to shelter our income and investments from taxes but most people don’t take full advantage.

You have until April 15th to make a contribution to an IRA (individual retirement account), SEP Plan (Simplified Employee Pension Plan) or ROTH IRA.

IRA and ROTH IRA 2022 maximum is $6,000 ($7,000 if you’re age 50 or older) and SEP Plan is 25% of total compensation or a maximum of $61,000. from taxes but most people don’t take full advantage.

Disclaimer: The information discussed should not be construed as tax, legal or investment advice. It is for informational purposes only and should not be taken as a recommendation or solicitation. Prior to making any financial decision individuals should seek advice from personal financial, legal, tax and other professional professionals. Investment products are offered through Aegis Capital Corp, a member of FINRA and SIPC. Investment products are not insured by the FDIC or any other federal government agency, are not deposits or other obligations of, or guaranteed by, a bank or any bank affiliate, and are subject to investment risks, including possible loss of the principal amount invested….(read more)

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As the end of the year approaches, it’s time to start thinking about maximizing your retirement savings. One of the most effective ways to do this is to contribute the maximum amount allowed to an individual retirement account (IRA). This not only reduces your taxable income for the year, but also allows your savings to continue to grow tax-free until you retire. But when is the best time of year to max out your IRA contributions?

First, it’s important to understand the limits for IRA contributions. For 2021, the maximum contribution limit is $6,000 for those under age 50, and $7,000 for those age 50 and over. These limits apply to both traditional and Roth IRAs. It’s also important to note that the deadline for making IRA contributions for a given tax year is typically April 15th of the following year. However, there are advantages to maxing out your contributions early in the year.

Maxing out your contributions early in the year gives your contributions more time to grow tax-free, potentially resulting in more earnings over the long term. Contributing a lump sum early in the year is also beneficial for those who have the funds available to do so, as you are able to take full advantage of the tax benefits and avoid the temptation to spend the money elsewhere.

However, many individuals may not have the means to fully contribute to their IRA early in the year. In this case, contributing throughout the year or even in a lump sum closer to the April 15th deadline is still better than not contributing at all. It’s important to note that even small contributions made over time can add up and provide substantial savings over the long term.

In addition to considering when to make contributions, it’s important to determine which type of IRA is best for you. Traditional IRAs offer a tax deduction for contributions, but withdrawals in retirement are taxed as ordinary income. Roth IRAs, on the other hand, do not offer a tax deduction for contributions, but withdrawals in retirement are tax-free. Depending on your current financial situation and expected future tax bracket, either option may be more advantageous.

In summary, maxing out your IRA contributions early in the year may provide more opportunity for growth, but contributing throughout the year or up until the April 15th deadline is still beneficial. It’s also important to consider which type of IRA is best for your individual financial situation. By prioritizing retirement savings and taking advantage of the tax benefits offered through an IRA, you can set yourself up for a more secure financial future.