Is it Too Late to Fund Your Retirement Account?

If you want to save for your retirement goals, it's not too late to get started with one of the many types of retirement plan options available. However, you'll encounter an annual deadline for when contributions count for the current tax year and help you get tax deductions and credits. The retirement account contribution deadline will depend on the specific account type and ranges from the end of the tax year to your tax filing deadline. You can also consider alternative retirement savings options.

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IRS rules currently allow you to contribute to various retirement plans that you're eligible for, even if you're getting a late start. For example, you can contribute to a 401(k) as long as you're deemed eligible by your employer, while an individual retirement account (IRA) has no age limit for contributions as of 2020. This means you can continue to build your nest egg to supplement Social Security benefits as long as you're financially able, but you'll need to pay close attention to annual contribution deadlines.

If you have an employer-sponsored retirement plan such as a traditional or Roth 401(k), 403(b) or similar account, then you have until ​Dec. 31​ or the last pay period for the tax year to contribute. On the other hand, if you have a Roth or traditional IRA, you can contribute as late as the tax year's filing deadline, which usually falls on ​April 15​ but can be as late as ​Oct. 15​ with an extension. The same later deadline applies to self-employed retirement plans like a Solo 401(k) or Simplified Employee Pension (SEP) IRA.

Americans saving for retirement have annual contribution limits for many retirement plans. Otherwise, exceeding the limit can come with an excess contribution tax penalty unless you can resolve the issue before filing your taxes.

For example, the Roth or traditional IRA contribution limit is ​$6,000​ (excluding rollover contributions), while a traditional or Roth 401(k) or a 403(b) allows for ​$19,500​ (up to ​$20,500​ for 2022). Once you're 50, you can make catch-up contributions of ​$1,000​ for these IRAs and ​$6,500​ for these 401(k)s and 403(b)s. SEP-IRAs, on the other hand, have up to a ​$58,000​ contribution limit (​$61,000​ in 2022), and SIMPLE IRA plans have a ​$13,500​ (​$14,000​ for 2022) limit for the tax year.

Note that making retirement contributions also includes meeting all the eligibility criteria for the specific plan. For example, depending on your filing status, you have to make under a certain income to contribute to a Roth IRA. Furthermore, while your income won't affect the ability to make full traditional IRA contributions, you can lose possible tax deduction benefits if you or your spouse already put money in an employer-sponsored retirement savings plan.

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If your employer offers a retirement plan, you can ask them about setting up an account and making employee contributions from your paycheck. Often, you'll get an employer match that helps you build your savings even more quickly.

If you want to open an IRA or you need a self-employed retirement account, you can just reach out directly to a brokerage like Fidelity to learn about setting up the account yourself. You can often make contributions throughout the tax year as you wish, as long as you don't exceed the limit.

You might consider speaking with a financial planner to learn about other retirement savings options like investing in an annuity, purchasing stocks or mutual funds through a standard brokerage account or using a high-yield savings account. These options have no annual contribution limits or deadlines and thus offer flexibility.

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As you contribute, know that you can reap tax benefits now or later. For example, your traditional IRA, SEP-IRA, SIMPLE IRA and traditional 401(k) contributions can be tax-deductible now since the funds will grow tax-deferred until you start making withdrawals. On the other hand, Roth accounts allow retirees to make tax-free withdrawals later without the tax benefits now. Your financial advisor can help you decide which is best for your personal finance goals.

Depending on your income and contribution amount, you might also qualify for the Saver's Credit on your next tax return. This can get you up to ​$1,000​ (if single) or ​$2,000​ (if married filing jointly).