If you’re saving in a traditional IRA, the more money you put in, the less taxable income you’ll have for 2021. And while you can technically fund your 2021 IRA up until next year’s tax-filing deadline in mid-April, you may want the peace of mind of having finished contributing by December 31.
2. Review your investments
If you want your IRA to deliver solid returns, it pays to go heavy on stocks. That doesn’t necessarily mean you need to buy individual stocks. If you’re not comfortable choosing those yourself, you could revert to index funds instead.
But either way, you’ll want to make sure your retirement plan is invested aggressively enough to generate decent growth. And also, you’ll want to make sure it’s invested appropriately given your age. If retirement is nearing, you may actually need to scale back on stocks and shift some investments toward bonds. But if you’re not planning to retire within the next 10 years, stocks are still the way to go.
3. Consider a Roth
It’s easy to see why savers like traditional IRAs — it’s nice to get an immediate tax break on your contributions. Roth IRAs don’t offer that perk, but what they do offer is an opportunity to enjoy tax-free growth in your retirement plan and tax-free withdrawals once your senior years roll around.