Beat the 2021 Roth IRA Contribution Deadline With This Simple Strategy
If you slacked off on your retirement goals in 2021, now is the time to catch up. You have until this year’s tax filing deadline (April 18 for most filers) to fund your 2021 Roth IRA (Individual Retirement Account). This account is a great way to pay your tax bill in advance and enjoy tax freedom later. But don’t dive in too quickly without reviewing the income requirements. There are penalties if you contribute more than the allowable limit.
Let’s run through a quick game plan as there’s less than a month left to contribute to a 2021 Roth IRA.
Start with a goal
Although time is running out, you don’t want to go too fast without developing a Roth IRA action plan. Ask yourself these three questions:
- How much am I eligible to contribute to a Roth IRA?
- How much do I want to contribute to my 2021 Roth IRA?
- How will 2021 dues get me closer to my master plan?
Now review the 2021 contribution limits to explore the possibilities. If you’re under age 50, you can contribute up to $6,000 to a Roth IRA. If you were 50 or older in 2021, you can contribute up to $7,000.
Next, take a look at your finances. How much can you realistically contribute without getting into a financial rut? You want to make sure you have your short term goals squared first. If you need to cut back on your favorite snacks or recurring subscriptions over the next month, it may be worth the sacrifice.
Put your contributions on autopilot
Once you have committed to a contribution amount, now is the time to start the process. You can set up automatic contributions from your checking account to your Roth IRA to ensure your money is flowing into the account before the deadline.
Since you have limited time to fund the account, here’s how you can set up your contributions:
- Contribute a lump sum now.
- Set up recurring transfers of a fixed amount each week.
- Consider assigning work bonuses to the account.
Let’s say you have a goal of contributing $3,000 to a 2021 Roth IRA. If you’ve reached your emergency fund goals and have $1,500 available, you can deposit that money into your Roth IRA right now. Then you can set up deposits of $500 every week for the next three weeks. Just before the deadline, set aside any extra cash or bonuses that come your way.
Create your financial plan
It is important to create a plan that suits your financial situation. If you don’t have any extra cash, it’s time to get creative.
Ask yourself these questions:
- Can I allocate money from a side gig to a Roth IRA?
- Can I get paid to teach what I know in the next seven days?
- Can I land a freelance contract that will pay me before the Roth IRA deadline?
The gig economy has created a plethora of opportunities to earn money on the go. If you’re willing to take on tasks for other people, like shopping, there are apps that can connect you with people who need your services.
Your 2021 Roth IRA dreams are closer than you think
Contributing to a 2021 Roth IRA can be a quick win for you this year. All you have to do is create a strategic plan so you can sprint to the finish line. After celebrating your win, it’s time to start making 2022 Roth IRA contributions if you qualify.
If you’re not convinced you should contribute to a 2021 Roth IRA, consider the possibilities of a million dollar Roth IRA. Your 2021 contributions can make a big difference to the growth and performance of your portfolio over time. So if you’re ready, now is the time to focus so you can wrap up any outstanding goals you had in 2021 and get a little closer to living your best life in retirement.