What time of year is best to make a contribution to a Roth IRA? Here are my top times on when it is best to contribute.

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Mike Bernard, CFP® offers advisory services through KFG Wealth Management, LLC dba Korhorn Financial Group. This information is for general financial education and is not intended to provide specific investment advice or recommendations. All investing and investment strategies involve risk including the potential loss of principal. Asset allocation & diversification do not ensure a profit or prevent a loss in a declining market. Past performance is not a guarantee of future results….(read more)

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A Roth IRA (Individual retirement account) is a retirement savings account that allows you to save and invest after-tax income for your retirement. Unlike traditional IRAs, contributions to a Roth IRA are not tax-deductible, but qualified withdrawals in retirement are tax-free. This can provide significant tax advantages in the long run, making it a popular choice for many investors.

But when is the best time to contribute to a Roth IRA? The answer to this question depends on your individual financial situation and goals. Here are some factors to consider when deciding when to contribute to a Roth IRA:

1. Do you expect to be in a lower tax bracket in retirement? If you anticipate being in a lower tax bracket when you retire, contributing to a Roth IRA may not provide as much tax benefit as a traditional IRA. In this case, it may be more advantageous to contribute to a traditional IRA, which allows you to deduct your contributions from your taxable income.

2. Are you eligible to contribute to a Roth IRA? There are income limits that determine whether you can contribute to a Roth IRA. For 2021, the income limit for single filers is $140,000 and for married couples filing jointly, it is $208,000. If you exceed these limits, you may not be eligible to contribute to a Roth IRA, and in that case, you may need to consider other retirement savings options.

3. Do you have other retirement savings accounts? If you already have a traditional IRA or a 401(k) plan through your employer, you may want to diversify your retirement savings by contributing to a Roth IRA. This can provide you with tax-free income in retirement and more flexibility in managing your taxes.

4. How long do you plan to invest in a Roth IRA? The longer your money is invested in a Roth IRA, the more time it has to grow tax-free. If you have a long time horizon before retirement, it may be wise to start contributing to a Roth IRA as soon as possible to take advantage of long-term growth opportunities.

In conclusion, the best time to contribute to a Roth IRA depends on your individual financial circumstances and goals. It is important to consider factors such as your tax bracket, eligibility, existing retirement savings accounts, and investment timeline when deciding when to contribute to a Roth IRA. Consulting with a financial advisor can help you make an informed decision and develop a retirement savings strategy that aligns with your long-term goals.