retirement

5 Ways You Can Still Boost Your Tax-Advantaged Savings for 2016

You have until April 18 to contribute to an IRA for yourself and your spouse, a Roth IRA for your kid, and a health savings account.

Question: Is it too late for me to contribute to my IRA and health savings account for 2016?

Answer: No, it’s not too late. Even though you had to make 401(k) contributions for 2016 by December 31, you still have until April 18, 2017, to contribute to an IRA, HSA and several other types of tax-advantaged accounts for 2016.

Contribute to an IRA, even if you earned just a little in 2016. If you earned any income from a job, you can contribute. Even part-timers and people who are partially retired can make IRA contributions. Contributions are limited to the amount you earned from working for the year, with a $5,500 maximum (or $6,500 if 50 or older in 2016). And even if you’re a dedicated saver who has maxed out your 401(k), you can still contribute to an IRA.

You can contribute to a Roth IRA if your adjusted gross income was below $132,000 if single or $194,000 if married filing jointly in 2016 (although the contribution amount starts to phase out if you earned more than $117,000 if single or $184,000 if married filing jointly). You can make traditional IRA contributions only if you’re younger than 70½, but there’s no maximum age to contribute to a Roth. See Retirement Plan Contribution Limits for 2016 for more information. Also see Even Retirees Working Part-Time Can Contribute to a Roth IRA.

Contribute to a spousal IRA. There is an exception to the earned income rule for IRA contributions: If you didn’t have earned income in 2016 but your spouse did, he or she can contribute up to $5,500 (or $6,500 if you’re 50 or older) to a spousal IRA on your behalf. The total combined amount a couple can contribute to both spouses’ IRAs cannot be more than the total amount of money both of you earned for the year. See Contributing to a Spouse’s IRA for more information.

Contribute to a Roth for your kid. Children of any age who earned income from a job in 2016 can contribute up to $5,500 (or the amount they earned in 2016, if less) to a Roth IRA, too. You can even give them the money to contribute. Not all IRA administrators let minors contribute to IRAs, but several brokerage firms, such as Fidelity, Schwab and TD Ameritrade, offer custodial Roth IRAs with low investment minimums and no IRA administrative fees. Contributing to a Roth IRA can give your kids a huge head start on building tax-free savings for retirement. See Roth IRAs Are for Kids, Too for more information.

Contribute to a self-employed retirement account. If you had any freelance or consulting income in 2016, you have until April 18 to open and contribute to a Simplified Employee Pension. Your contributions are tax-deductible, and the money grows tax-deferred until retirement. If you already have a solo 401(k) account, you have until April 18 to make your 2016 contribution, but you must have opened the account by December 31. See How Self-Employed Workers Can Save for Retirement for more information.

Contribute to a health savings account. If you had a high-deductible health insurance policy in 2016 (with a deductible of at least $1,300 for individual coverage or $2,600 for family coverage), you can make tax-deductible contributions to an HSA. You can contribute the full $3,350 for single coverage or $6,750 for family coverage if you had an HSA-eligible health insurance policy for all of 2016. You can also contribute the full amount if you didn’t have the HSA-eligible policy for the full year but did have it on December 1 (in that case, you need to keep an HSA-eligible policy for all of 2017). If you had an HSA-eligible policy only for the first few months of 2016, your contribution limit is based on the number of months you had an eligible policy. See HSA FAQs for more information.

Contribute to a 529 college-savings plan. Most states that offer an income-tax deduction for 529 contributions required you to contribute by December 31 to get a tax break for 2016. But a few states give residents until the tax-filing deadline in April 2017 to make tax-deductible contributions for 2016, including Georgia, Iowa, Mississippi, Oklahoma, Oregon, South Carolina and Wisconsin. For details about each state’s rules and deadlines, see our Find the Best 529 Plan for You tool. Also see SavingforCollege.com.

Most Popular

12 Costs of Owning a Cat
how to save money

12 Costs of Owning a Cat

Housecats may be known for their aloofness and low-maintenance attitude, but they're not cheap. Here's what you can expect to spend if you plan on ado…
October 16, 2020
How to Pick the Right Medicare Plans for You
Healthy Living on a Budget

How to Pick the Right Medicare Plans for You

As you're signing up for Medicare, you must learn the basics of Medicare Part A, Part B, Part D, medigap plans, Medicare Advantage plans and even doug…
September 30, 2020
Election 2020: Joe Biden's Tax Plans
taxes

Election 2020: Joe Biden's Tax Plans

With the economy in trouble, tax policy takes on added importance in the 2020 presidential election. So, let's take a look at what Joe Biden has said …
October 15, 2020

Recommended

Tax Extension Deadline: File Your 2019 Return by October 15 to Avoid Penalties
tax deadline

Tax Extension Deadline: File Your 2019 Return by October 15 to Avoid Penalties

If you chose to extend your tax return's due date, the tax extension deadline is October 15!
October 15, 2020
Roth IRA Contribution Limits for 2020
Roth IRAs

Roth IRA Contribution Limits for 2020

The Roth IRA contribution limit remains the same for 2020 as it was for 2019. Retirement savers 50 and older can contribute an extra amount. Income li…
October 1, 2020
The 25 Best Low-Fee Mutual Funds to Buy in 2020
mutual funds

The 25 Best Low-Fee Mutual Funds to Buy in 2020

The key to building wealth long-term is buying high-quality (but low-fee) mutual funds run by seasoned stock pickers who have skin in the game. Here a…
September 29, 2020
Deadline for Returning RMDs to Retirement Accounts is Approaching Fast
Coronavirus and Your Money

Deadline for Returning RMDs to Retirement Accounts is Approaching Fast

Retirees who took a required minimum distribution earlier this year need to act quickly if they want to avoid taxes on the money they withdrew.
August 24, 2020