Maxing out your IRA is a great way to improve your retirement readiness, but it's no easy feat for many of today's workers. You must set aside $7,000 in 2024, or $8,000 if you're 50 or older, to pull this off. That's a lot of money to forgo this year, but it could be worth the effort. A $7,000 IRA contribution this year could be worth more than $32,000 in 20 years if you earn an 8% average annual return.
With over half of 2024 gone, you might consider putting off your plans to max out your IRA until next year, but there's still plenty of time for 2024 contributions. Here's how much you'd have to set aside per month to reach your goal this year.
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How to max out your IRA in 2024
There's about five months left in 2024, so if you hope to save $7,000 in your IRA this year, you'd need to set aside $1,400 per month through December. If you're 50 or older and eligible to make catch-up contributions, you'd have to save $1,600 per month.
It sounds intimidating, but you may be able to pull it off with the right strategy. To start, figure out how much money you can afford to defer to retirement savings. Then, take a closer look at your budget and see if there are any areas of overspending where you feel comfortable cutting back for the rest of the year.
Making automated contributions to your IRA from a linked bank account can help you avoid forgetting to transfer the funds on your own. If you decide to go this route, choose a schedule and an amount you feel comfortable with. It's best to be conservative here. If you wind up with more money than you expected to have, you can always make an additional manual contribution.
One of the great things about IRAs is they allow lump-sum contributions, unlike 401(k)s . So if you get a year-end bonus, you can deposit this in your IRA as well. If you're expecting a large sum at the end of the year, you might even be able to reduce your monthly contributions. For example, if you think you'll get a $1,000 bonus, you'd now only have to save $6,000 between now and the end of the year out of your paychecks, reducing your monthly contribution rate to $1,200.
What if you can't do it?
Don't be discouraged if you're not able to max out your IRA before 2024 ends. It's difficult for a lot of people even with the full year to pull it off. There are two pieces of good news, though.
First, you don't actually have to make your 2024 IRA contributions by Dec. 31. You can make make IRA contributions up until the tax filing deadline, which is April 15, 2025. However, if you make 2024 contributions in 2025, you'll have to ensure your IRA provider applies the contribution to the correct tax year.
Second, you don't have to max out your IRA in any year in order to retire comfortably. Even if you only save half the annual limit, that's still an accomplishment to be proud of.
Plus, an IRA isn't always your best option for retirement savings. If you qualify for an employer match, for example, your 401(k) is a much better place for your savings, at least until you've earned the entire match.
You must decide which accounts to use and how much you feel comfortable contributing to retirement right now. Just remember, there's still quite a bit of time left in the year and every dollar you set aside counts. Do what you can and celebrate your progress along the way.
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