2019 Roth IRA & Traditional IRA Contributions Update

As you know, the tax filing deadline for 2019 has been extended to Wednesday, July 15, 2020. Besides this extension giving you time to not rush in your filing, there is also another benefit that comes along with the date push: contributing to Roth and Traditional IRAs until that deadline.

2019 contributions can be made up until you file your taxes or the deadline, whichever is earlier. If you have already filed your taxes, you may not be out of luck. It is still possible to file an amendment to your tax return noting that the contribution was made. Although additional work for your CPA, in general it is easy to file an amendment.

If you do plan on contributing, make sure you code it as a 2019 contribution. Although 2020 contributions are allowed now, it is a better technique to use the 2019 contribution and save 2020 so it is available up until April 15, 2021, assuming no additional date adjustments.

2019 IRA Contribution Limits

2019 contribution limits are $6,000 per person with an additional $1,000 available if you are over 50, for a total of $7,000. Remember, you need to be under the income level to make a full contribution: Single under $122,000 and joint under $193,000 in modified adjusted income. If you are over those amounts, there are some techniques that can still enable contributions, which I will review in a later post. One exception to the income limit is if you do not have access to a retirement plan through your employer- if that is the case, you may be able to contribute and deduct the full traditional amount regardless of income.

Why Now is a Good Time to Diversify with a Roth IRA

One final thought specifically on Roth IRA’s: Federal tax rates are at historically low levels. With a possible pending recession, election, and virus fallout, it is reasonable to expect an increase in State and Federal tax rates in the coming years. It is for that reason that now could be an ideal time to pay your taxes, receive no tax break this year, and then receive all earnings and contributions tax free at a later point with a qualified distribution. With so many people very over weighted in pre-tax monies and accounts (like a prototypical 401(k)), this is a great time to pay taxes and diversify into an option with tax free growth.

More Retirement Planning Advice

If you’re looking to maximize your retirement income, or simply need help creating a plan for  retirement, give me a call at (518) 621-7173, or schedule a free consultation. As a financial planner that specializes in retirement planning, I’ll explain how much money you need to retire, help you develop and implement a plan to reach your goals, and work with you over the long-term to adjust the plan as your needs change.

I have offices in Albany and Old Forge NY, and I’m available to meet with you virtually, or at your home or business anywhere in the Glens Falls, Saratoga & Lake George regions.