If you want to maximize the benefits of your retirement plan, it’s important to note the deadlines that go along with them.
Not all retirement plans should be, or can be, set up at the same time. And if you want the tax benefits of your plan, there is a cutoff date to apply your contributions to this tax year.
So if you’re planning on adding a retirement plan to your portfolio or making a contribution, here are some of the important facts and dates to know about:
401(k)
The 401(k) is the most common retirement plan in the U.S. Most employers offer a 401(k) plan of some kind.
As of 2019, you can contribute up to $19,000 as an employee, or $25,000 if you’re 50 or older. That limit can vary by plan. Employers can kick in an additional 25% of compensation up to $56,000.
Deadline to set up a 401(k): By the end of the year
Deadline to contribute for the 2019 tax year: April 15, 2020
Simple IRA
Businesses with less than 100 employees and self-employed workers might opt for a Simple IRA plan. These plans come with a wide range of investment options, no account fees and no minimum to start up a plan.
2019 contribution limits are up to $13,000 in salary deferrals and $16,000 for age 50 and older.
Employers can match up to 3% of employee contributions.
Deadline to set up a Simple IRA: October 1st
Deadline to contribute for the 2019 tax year: April 15, 2020
SEP IRA
SEP IRA plans are available for self-employed people or small business owners, whether they have employees or not.
They are easy to use and flexible with investment options.
These plans are only available to employers and business owners, who can contribute up to 25% of compensation – a maximum of $56,000.
Deadline to set up a SEP IRA: By the employer’s tax filing deadline, which is typically April 15. That date could change if a filing extension has been used.
Deadline to contribute for the 2019 tax year: April 15, 2020
Self-Employed 401(k)
A self-employed 401(k), also known as a Solo 401(k), is only available for self-employed people or business owners who don’t have employees (with the exception of a spouse.)
It’s a bit different from a SEP IRA in that the plan owner can make contributions as both employer and employee, which means you might be able to make higher contributions with a self-employed 401(k).
Employees can contribute up to $19,000 in salary deferrals or up to $25,000 for age 50 and above. On top of that, employers can contribute up to 25% of compensation up to $55,000.
Deadline to set up a self-employed 401(k): December 31, or at fiscal year’s end.
Deadline to contribute for the 2019 tax year: Can be made up until the employer’s tax deadline
Traditional IRA
A traditional IRA allows you to save for retirement while taking advantage of tax benefits. The contributions you make to a traditional IRA are deductible, and the money in your IRA isn’t typically taxed until you take distributions.
In 2019, you can contribute up to $6,000 to your traditional IRA, or $7,000 if you’re age 50 or older.
Deadline to set up a traditional IRA: April 15th of the upcoming year
Deadline to make contributions for the 2019 tax year: April 15th, 2020
Roth IRA
A Roth IRA is a retirement savings account that, unlike the traditional IRA, does not offer tax benefits upfront. However, you do benefit later. Your IRA income in retirement will be tax-free, and that includes your earnings.
You also don’t have required minimum distributions, so you can leave that money to grow and pass it on to a beneficiary.
The 2019 contribution limits for a Roth IRA in 2019 are $6,000, or $7,000 for age 50 and above.
Deadline to set up a traditional IRA: April 15th of the upcoming year
Deadline to make contributions for the 2019 tax year: April 15th 2020
Health Savings Account (HSA)
A health savings account, or HSA, is often used along with a high-deductible insurance policy to allow you to save money for medical expenses. The money that you save is tax-free and tax-deductible, as long as it is used on qualified medical expenses.
Deadline to set up an HSA: Typically you sign up during open enrollment at the end of the year
Deadline to make contributions for the 2019 tax year: April 15, 2020
About Michael
Do you need help preparing for retirement? Contact me today to set up a meeting to talk about your goals. You can also download my free ebook for physicians for tips and information about getting your finances on track.