3 Ways to Save for Retirement Before The Tax Deadline

3 Ways to Save for Retirement Before The Tax Deadline

March 04, 2018

The deadline to file your 2017 individual taxes is right around the corner. You have until April 17, 2018, to get your individual tax return postmarked and in the mail. If you run out of time and don't have a chance to gather up all of your documents, you can file an extension until October 15, 2018.  Before you lick the stamp to mail off your return whether it is on time or extended, there are three things you should consider that could change your financial future.

Max Out Your Traditional IRA

The due date to make a contribution to your employer's 401(k) can be complicated for the employee due to the rules of the plan. Unlike an employer 401(k) plan, an individual has until the due date of the tax deadline to make a contribution to an individual retirement account (IRA). If you have made small contributions to your IRA throughout the year, take a look at your statement and calculate how much more is needed to max out your contribution for 2017. What's great about the Traditional IRA is there is no income restriction. Your income does, however, determine whether the contribution is deductible or nondeductible. The most important thing is if you have the money to add to the account, do so by the April 17th tax filing deadline. For 2017, the maximum contribution is $5500 with a $1000 catchup contribution if you are 50 or older (contribution rates did not change for 2018). The earnings in your IRA grow tax-deferred, but "Uncle Sam" will want his share of the earnings when you take the money out. 

Max Out Your ROTH IRA

The ROTH IRA is still my favorite retirement account because the funds in this account grow tax-deferred and nontaxable at withdrawal. Unlike the traditional IRA, there are limitations to the contribution based on income.  If you make over $196,000 as a married couple for 2017, you cannot make a contribution to your ROTH IRA and for a single person, head of household, and married filing separately, that maximum income level is $133,000. So if your income falls below these thresholds, make sure you beat the tax deadline and contribute to this account. The contribution limits are the same for the Traditional and ROTH IRA at $5500 and $6500 for those who are 50 and older. Your contribution amount could vary depending on your income so make sure you don't make the mistake of maxing out this account if you are only eligible for a partial contribution.

Max Out Your SEP IRA 

When I started learning about all of the different retirement accounts available, the one thing that stood out about the SEP  (Simplified Employee Pension) IRA is the fact that you can make a contribution to this account up to the extension deadline.  This retirement account is designed for self-employed individuals or small business owners. The employer (which could be the sole owner) makes a contribution on behalf of the employee. The contribution amount is limited to the lesser of 25% of compensation or $54000 for 2017 (for 2018, that amount has increased to $55000). Because this is an employer contribution, a small business owner could also make a contribution to an individual IRA account. 

To learn more about all of the retirement accounts, the IRS website offers a great FAQ on the various retirement accounts.  This is a great resource for small business owners who are trying to figure out which type of account to offer their employees and the limitations of contributions for an individual contributor to a retirement account. 

About Terrell Dinkins, MBA, ChFC®

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Terrell Dinkins, MBA, ChFC® is an investment adviser representative of and offers investment advisory services through OBN Wealth Advisors, LLC, a registered investment adviser offering advisory services in the State of Georgia and other jurisdictions where registered or exempted. Main Office: 950 Eagles Landing Pkwy, Suite 216, Stockbridge, GA 30281. Tel: 404-723-9780. Website: OBN Wealth Advisors