The IRS allows 2021 IRA contributions to be made until April 15, 2022, and in some instances, even further. Many benefits come with contributing to an IRA, such as immediate tax savings, “tax-deferred” or “tax-free” growth, and of course, saving for retirement. Take a look below for a brief overview of the various IRAs and their characteristics.
- Traditional IRA
- Pre-tax contributions made by an individual
- 2021 Contribution Limit = $6,000
- 2021 Catch Up (if 50 years or older) = $1,000
- Contribution Due Date = April 15, 2022
- Account Set Up Due Date = April 15, 2022
- Results in an immediate tax deduction on the individual’s 2021 Tax Return
- Earnings grow “tax-deferred” until you withdraw funds
- Roth IRA
- After-tax contributions made by an individual
- 2021 Contribution Limit = $6,000
- 2021 Catch Up (if 50 years or older) = $1,000
- Contribution Due Date = April 15, 2022
- Account Set Up Due Date = April 15, 2022
- Tax deduction is not available as these contributions are made on an “after-tax” basis
- Earnings and withdrawals are “tax-free”
- SEP IRA
- Pre-tax contributions made by employer. Effective tool for self-employed or small businesses.
- 2021 Contribution Limit = lessor of $58,000 or 25% of compensation
- Contribution Due Date = 2021 employer tax return due date (including extensions)
- Account Set Up Due Date = 2021 employer tax return due date (including extensions)
- Results in an immediate tax deduction on the employer’s 2021 Tax Return
- Earnings grow “tax-deferred” until you withdraw funds
Call us to discuss your retirement saving strategy at (601) 362-1000!