April 15. The dreaded tax deadline. The day when financial procrastinators break out in a cold sweat. It’s also the deadline for contributing to an IRA for the previous year. Yes, you read that right. The IRA contribution deadline is April 15, 2024, for the 2023 calendar year. Missing this crucial deadline could cost you dearly.
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The Impact of the IRA Deadline
Procrastination is a dangerous game, especially when it comes to retirement savings. Missing out on IRA contributions for 2023 could have significant long-term consequences. For 2023, the IRA contribution limit stands at $6,500, with a higher limit for those 50 and above. Next year, the limit jumps to $7,000 and $8,000 respectively.
If you skip your $6,500 contribution for 2023, and invest it at an average annual growth rate of 8%, here’s what you could be forfeiting:
| After This Many Years of Your Single $6,500 Investment Growing at 8%… | You’d Have: |
|---|---|
| 10 | $14,033 |
| 15 | $20,619 |
| 20 | $30,296 |
| 25 | $44,515 |
| 30 | $65,407 |
| 35 | $96,105 |
| 40 | $141,209 |
Data source: author.
Imagine the impact on your nest egg at retirement age. For a 35-year-old, missing a 2023 contribution could cost you $65,407 in potential growth. The pain intensifies with age, making it essential to seize every opportunity for retirement savings.
The Significance of Your Loss
Planning for retirement is an unavoidable reality. While Social Security plays a role, relying solely on it could lead to financial strain. Missing a seemingly modest $6,500 IRA contribution could spell trouble down the road, especially for those 50 and above.
Consider the advantages of Roth IRAs and the tax-free growth they offer, making them a critical component of retirement planning. Investing in retirement accounts or low-fee index funds can simplify your path to financial security.
Even if you missed the April 15 deadline, it’s not too late to kickstart your retirement savings. Every dollar counts towards building your nest egg, whether through a regular brokerage account or workplace retirement plans like a 401(k).
Don’t delay securing your financial future. Start by fulfilling your 2023 IRA contributions and take proactive steps towards a worry-free retirement. Your future self will thank you.
