Investing money into a retirement account is not only a great way to save for retirement, but some qualified retirement plans also allow you to deduct your contributions from your taxes in the year you made the contributions.
The April 15th tax filing deadline is right around the corner. While time is already out to contribute to your employer-sponsored 401(k), there is still time to minimize your tax bill by contributing to other retirement accounts.
There is still time to contribute to an Individual Retirement Account (IRA) for 2013. The deadline to contribute to an IRA is April 15, 2014. The contribution limit is $5,500 for people under age 50 and $6,500 for people ages 50 and older. Your deduction may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels. Be sure to tell your plan sponsor that any contributions made before April 15 is designated for 2013. Many financial advisers recommend making IRA contributions as early in the year as possible as markets tend to start off stronger at the beginning of the year, giving you a bigger boost than if you wait until April to contribute.
If you have not established an IRA yet, you still have time for that as well. The IRA establishment deadline is also April 15. Make sure your IRA application is postmarked by midnight the day of the deadline to be valid.
Self-employed individuals have an additional opportunity to contribute to retirement savings. If some or all of your income is via self-employment, you can contribute up to 25 percent of your net earnings from self-employment, up to $51,000, to a Simplified Employee Pension (SEP) plan. You have until the due date of your tax return, including any extensions, to establish and fund your SEP for the 2013 tax year.