Can’t Max Out Your IRA by the End of 2022? Here’s Why You Don’t Have to Worry

When it comes to retirement savings, IRAs are a mixed bag. On the plus side, they generally come with a greater number of investment options than what you'll find in a 401(k) plan. For example, with IRAs, you can put money into individual stocks, whereas 401(k) plans don't typically let you do that. But getting to hand-pick stocks could mean assembling an investment portfolio that better aligns with your goals and risk tolerance, which is an important thing.

Another way IRAs differ from 401(k)s is that they come with lower annual contribution limits. So while you might struggle to max out a 401(k), you might have a much easier time hitting that annual limit on your IRA.

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Of course, it can also be argued that lower contribution limits are a bad thing. The more money you're able to save in a tax-advantaged manner, the more tax savings you stand to reap, and also the more of a nest egg you might accumulate. But alas, IRA limits lag behind 401(k) limits in a very big way, so if you want to look at that in a positive light, you can focus on the fact that maxing out may be a lot more attainable.

Only what if it's not attainable this year? It may be that you had to put your IRA contributions on pause to cope with inflation. Or maybe you encountered a personal financial issue that required you to divert money elsewhere.

Either way, if you haven't yet maxed out your 2022 IRA and aren't sitting on a pile of money, you may not be able to hit that max by the end of December. But that doesn't mean maxing out that account is off the table.

You get more time

If you're saving for a retirement in a 401(k), you only have until the end of a given calendar year to put money into that account. So if your goal is to max out your 401(k) for 2022, your final contribution needs to hit your account by Dec. 31.

But IRAs give you until the following year's tax-filing deadline to make contributions. So technically, you have until mid-April of 2023 to finish funding your 2022 IRA. That gives you a lot more time to meet your savings goal.

And it's not just IRAs that have this rule. If you're socking money away for medical costs in a health savings account (HSA), you also have until the 2023 tax-filing deadline to finish funding your account for 2022 purposes.

In fact, it could actually make more sense to prioritize your HSA over your IRA if funds are limited and you're forced to choose between the two. The reason? HSAs offer more tax benefits than any other tax-advantaged account.

With an IRA, your contributions are tax-free if you're saving in a traditional plan, but investment gains are taxed eventually, and withdrawals are taxed in retirement. Now if you have a Roth IRA, you won't get tax-free contributions, but investment gains and retirement withdrawals will be tax-free.

HSAs give you all three tax breaks. Contributions are tax-free, investment gains are tax-free, and withdrawals are tax-free when used for medical spending. And since you can pretty much bank on having healthcare expenses to grapple with your entire life, it really pays to max out an HSA if you can.

Know the rules

When it comes to retirement savings, each plan has its own rules with regard to investments, contribution limits, and the timing of your contributions. Knowing how your plan works could make it easier to meet your savings goals.

But for now, you can rest assured that if you don't think you'll manage to max out your IRA (or HSA) this month, you're not out of options. You can take steps to free up cash in early 2023 and finish funding your savings then.

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