Didn't max out your IRA this year? There's still time in 2022

Marko Geber

If you couldn't max out your individual retirement account in 2021, don't despair.

There's still time to make a contribution to traditional and Roth IRAs.

The deadline for putting money into IRAs for this year is April 15, 2022, giving savers an additional four months to contribute.

For 2021, the maximum contribution to an IRA is $6,000 for those under the age of 50 and $7,000 for those 50 and older. The limits are the same for 2022, according to the IRS.

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If someone didn't max out their IRA in 2021, the April deadline means they can sock away more money next year. In March, they could contribute the full $6,000 earmarked for 2021 and put in another $6,000 for 2022.

“It's the benefit to get more in,” said Sheri Fronsee, a CPA and tax researcher specialist with the National Association of Tax Professionals.

More time, more money

The extra time can also be helpful for people who contribute regularly throughout the year yet aren't putting in enough to reach the maximum.

For example, someone putting money into an IRA monthly would need to contribute $500 each month to get to $6,000. For many Americans, that's not feasible, but they might have extra money at the end of the year — or the beginning of a new one — to invest, especially if they get a bonus or a raise.

“They still have a little wiggle room,” said Fronsee. “If they can afford it, they can drop in more to max it out.”

Maxing out the previous year also gives you more time to potentially save more.

“If cash flow is an issue, you've got 15 more months to make a decision [for 2022] versus only having three more months to make a decision for 2021,” said Clark Kendall, a certified financial planner and the president and CEO of Kendall Capital in Rockville, Maryland.

For those contributing to a traditional IRA, there may be tax benefits for contributions before the end of the year. Some of those savings can be deducted from taxes, potentially lowering your liability. In addition, low-income workers may be eligible for the saver's credit if they use a traditional IRA.

With a Roth IRA, which has specific income limits for those who can contribute, there are no immediate tax benefits. That's because money is put in after-tax, meaning it can be withdrawn without paying any extra in retirement.

The benefit of time

There is another benefit to investing earlier if you can — it means your money has more time to appreciate in the stock market. This year, the S&P 500 Index is up more than 27% through Wednesday's close.

“It's a seed or planting that turns into a huge tree that can make a difference and will give you great shade and comfort in the years to come,” said Kendall.

Not all retirement accounts give you additional time. Employer-sponsored 401(k) and 403(b) plans still have a Dec. 31 deadline for 2021 contributions.

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