- April 26, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Maximizing IRA Contributions and Pre-saving for Future Contributions
I have already maximized our IRA contributions for 2024 and plan to do the same for 2025 using a bonus I will receive in October. However, I am also considering pre-saving for our 2026 contribution.
## Choosing Between Retirement Brokerage Account or HYSA for Pre-saved Funds
Given that the contribution is 23 months away, I am unsure whether I should save the money in our retirement brokerage account or in a High-Yield Savings Account (HYSA). The funds in the retirement brokerage account would eventually be invested in the same target dated index fund that I use for our IRA contributions.
## Considerations and Potential Tax Implications
I am thinking about potential tax consequences and other factors associated with saving in the brokerage account before moving it to the IRA. While I believe that keeping the money in the market for a longer period may be beneficial, I am concerned that I may be overlooking important details.
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AI Legalese Decoder can assist in analyzing the tax implications of moving funds between accounts, providing insights on the optimal strategy for maximizing savings and minimizing tax liabilities. By utilizing this tool, I can make informed decisions regarding where to save the funds for our future contributions.
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Have you considered investing that money in a taxable brokerage and then investing regularly into your IRA throughout 2026 instead?
Having money invested earlier is better on average than waiting, and paying the tax on earnings to withdraw the money early 2026 to re-invest it is just locking in some additional taxes to have the money invest in the IRA earlier.
I’m not entirely sure how the math lines up, but I would imagine investing the IRA money up front (minus dollars lost to paying additional tax on earnings) wouldn’t average out to anything more than 2 years of average brokerage earnings and just keeping the money in the brokerage while investing over the year through the IRA.
Basically, if you were to do the math you might end up with a little more dollars in your IRA at the end of 2026, but you would have notably less dollars in your brokerage. While it is better to maximize the tax advantage of the IRA, sacrificing brokerage dollars (by paying additional taxes) may not be worth the minor (couple hundred dollars in a good year) IRA advantage.
Great job on maxing both IRAs for 2024. 🔥
Consider a certificate of deposit (CD). I saw a CD paying 6%+ APY the other day. This is the safest, no risk, highest yield you’ll get.
If you want to take more risk? A brokerage account for sure. Just no way of knowing if that money invested today will be higher in 23 months.
Edit: typo