2020 Retirement Plan Contribution Deadline Extended
The IRS has extended the 2020 retirement plan contribution deadline to Monday May 17th. This gives people an extra month to make their 2020 retirement plan contributions. Now be a good time to review your 2020 tax situation and discuss some tax saving strategies with your CPA. Let’s review the 2020 contribution limits:
2020 Contribution Limits:
Traditional IRA: $6,000 under 50: or $7,000 if you’re over 50 (Pre-tax contribution)
Roth IRA: $6,000 under 50: or $7,000 if you’re over 50 (After tax contribution)
SEP IRA: $57,000 (Pre-tax contribution)
Health Savings Account: Self-only medical plan: $3,550: Family medical plan: $7,100, $1,000 catch-up over 55 (Pre-Tax Contribution)
Solo 401(K): $57,000 under 50, or $63,500 over 50 (Can be pre-tax, after tax, or a combination)
Income tax is a fact of life but contributing to a retirement plan could reduce the amount you are required to pay. The United States operates on a graduated tax schedule and you can find the 2020 federal tax brackets by clicking HERE. In addition to federal tax, the state of Colorado has a flat income tax rate of 4.63%. The IRS allows you to contribute to pre-tax retirement plans to defer the tax until you decide to take a distribution at a later date. The tax game is a simple one, pay the minimum amount of tax as allowed by the law. This is especially helpful if your taxable income pushes you into a higher tax bracket. Making a contribution may allow you to lower the tax you are required to pay.
What can you do if you don’t have a retirement plan? What can you do to get started? Feel free to contact New Direction Trust to determine which retirement plan best fits your needs. We would be happy to evaluate your situation and assist you with setting up a retirement plan. Most plans can be created online, and accounts are often opened within 24 hours. Contributions can be made via an electronic transfer, ACH or wire, or by mailing a check. If the contribution check is postmarked by May 17th, we can count it towards the 2020 contribution, and if we receive the electronic contribution request by May 17th, that will also count towards the 2020 contribution. Feel free to reach out before the May 17th deadline passes.