A Roth IRA is a tax-advantaged retirement savings option. Unlike a Traditional IRA, contributions to a Roth IRA are made with after-tax income and lack an immediate tax deduction. However, qualified withdrawals, which encompass contributions and growth, are tax-free.
Given the tax-free nature of this account, the Internal Revenue Service (IRS) imposes restrictions on contributors based on income. In 2024, if your income exceeds $246,000 (Married Filing Jointly) or $165,000 (Single), direct contributions are disallowed, necessitating a strategy like a Roth Conversion or Backdoor Roth IRA.
Additionally, there is an annual limit on contributions to Traditional and Roth IRAs combined. In 2025, the limit is $7,000 for those under 50 and $8,000 for those 50 and older, which includes a $1,000 catch-up contribution.
Due to the funding complexity, high-net-worth professionals typically contribute annually as a lump sum. Now, the question arises: When is the optimal time to fund a Roth IRA?
You can make an IRA contribution for a given year anytime between January 1 and the tax-filing deadline of the following year (usually April 15). Therefore, you can make a:
Funding your Roth IRA in January provides the most long-term advantage. By contributing early, investments have more time to grow tax-free. Just as in medicine, early intervention often yields better outcomes; in investing, the earlier you invest, the longer your money has to grow.
While early-year contributions offer advantages, other considerations come into play. Factors such as funding availability, timing contributions with bonuses, and weighing the pros and cons of debt reduction versus investing should be taken into account.
Don’t let uncertainty hold you back from securing your financial future. Whether you’re a physician, dentist, or high-net-worth professional, understanding the ins and outs of Roth IRAs can significantly impact your long-term wealth.
If you're unsure about your contribution eligibility or need advice on optimal timing, schedule a consultation with one of our expert financial planners today! We'll help you navigate the complexities and set a strategy that works for you.
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As the Director of Planning & Strategy for Spaugh Dameron Tenny, Jordan applies his academic and practical experience in the creation and maintenance of the firm’s financial plans, as well as coordinating research efforts for products and strategies that may benefit clients. Originally from Canada, Jordan came to Charlotte on a golf scholarship where he attended Queens University of Charlotte. In addition, Jordan has a Master’s degree in Wealth and Trust Management.
