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There is Still Time to Make Last Year’s IRA Contribution

Putting off, or not making a contribution to an IRA can be easy.  There may be other uses for the funds that seem more pressing – a vacation, a down payment on a new car, new furniture or maybe just leaving the funds in your savings or checking account to build some liquidity. However, making that contribution now can make a big difference when you retire.  The contribution limit for 2024 is $7,000 (For those ages 50 and above, the limit is $8,000), and the contribution deadline for 2023 is April 15, 2024.

Some of the benefits of IRAs are obvious – tax-deferred earnings, potentially a tax deduction with a regular IRA and the permanent tax-free nature of a Roth IRA, but two of the not-so-obvious benefits should not be overlooked:

  • Making IRA contributions forces you to save.  Saving more automatically increases the amount you accumulate.  Once this saving becomes a habit, you may not even notice you are doing it.
  • By contributing early and often, your IRA balance has the opportunity to grow even more. 

The cost of missing one IRA contribution

The tax-deferred compounding within an IRA allows your money to grow faster since you do not have to pay any taxes while the funds are in the IRA.  Roth IRAs provide an even better result since distributions are not subject to tax – ever. 

So, consider what missing just one $5,500 contribution can mean. If you are age 30 and started contributing in 2023 instead of 2024 (and you earn 6% on your funds), you will have $39,880 more ($612,891 instead of $573,011) at age 65.  Of course, what you earn on your IRA is unknown and if it is a regular IRA your tax bracket when you take funds out is unknown, but this basic example clearly shows that the cost of delaying just one year can be significant. 


Take advantage of the tax-deferred compounding and increasing limits of an IRA to prepare for a financially secure retirement, and don’t put off until next year what you can still contribute for the tax year 2023.  Consult with a trusted tax advisor to verify your contribution eligibility and limits and visit your banker to make your 2023 Traditional or ROTH IRA contribution before April 15.