IRA Contribution Deadline Approaching: Things to Consider

Investors have until April 15, 2021 to make contributions to their Roth and traditional IRA accounts under the maximum allowances for tax year 2020.  Tax-advantaged retirement accounts are one of the best ways to save and invest money, due to the fact that taxes can detract significantly from investment gains with short-term and long-term capital gains tax, dividend tax, and interest tax.  This benefit is meaningfully amplified over time due to the compounding nature of investment returns.  A common mistake that investors make is to put off maximizing IRA contributions until future years until their income is higher – the problem with this is that you can never go back and make up for years in which you contributed less than the maximum amount, which means that opportunity is lost forever.  If possible given budget cash flows and other financial considerations, pre-retirement investors should try to contribute as much as possible to tax-advantaged retirement accounts, up to the maximum allowable amount, to take advantage of the significant benefits.

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- Anthony Winkels is Managing Partner and Wealth Advisor at Fortis Wealth Management