How Can I Ramp Up My IRA in 2021?
As we head into another tax season, don’t overlook your IRA. Here are some easy and practical ways you can ramp up your IRA in 2021.
Did you know you can contribute for 2020 until the tax filing deadline? That means you have until April 15th to make your last contribution.
If you’re planning to contribute, get it done sooner rather than later. Avoid any last-minute problems and let your IRA grow faster.
Talk to Your Advisor About a Roth IRA Conversion.
If you have a traditional IRA, you can convert part of it to your Roth IRA.
Because tax laws are constantly changing, a conversion that didn’t make sense last year might do so in 2021.
While it might not be a great option for everyone, it is worth discussing with your tax specialist.
Know How to Move Your Money.
I can’t stress this enough. Know how to move your IRAs.
If you’re wanting to consolidate retirement accounts, make sure to roll over them to a like-titled account.
This will also avoid the 60-day and once-per-year rollover rule.
Do not accept a check in your name. Otherwise, you will owe taxes on that account immediately.
Update Your Beneficiary Designation.
Make sure your hard-earned money will be left to the right people. Family and friend dynamics change often. Be sure to keep your beneficiary designation form up-to-date.
Recent changes like the SECURE Act could also impact your current beneficiary form. Spend some time making sure your wishes are accurately documented.
Use QCDs and Other IRA Tax Breaks.
IRA rules can be overwhelming, but make sure that’s not keeping you from options you might benefit from.
If you’re over 70 ½ and charitably inclined, you might consider a Qualified Charitable Distribution (QCD). First-time homebuyers might be able to use a portion of their IRA to help fund their down payment.
Take some time to learn what options you have available to you.
Plan for the Unexpected.
Our tax laws and IRA rules are constantly changing. I think we should expect more change in 2021 than in previous years.
Remember, IRS guidance on recent rule changes and a new administration and Congress could have a big impact on your IRA.
The bottom line? Plan ahead and work closely with a fiduciary professional who will seek out the best solutions to fit your situation.