As the tax deadline approaches, many individuals and families are focused on gathering documents and finalizing returns. But March and early April also present an important opportunity: you may still be able to make an IRA contribution for the prior tax year. Reviewing your options now can be a meaningful step toward strengthening your long-term retirement strategy.
Whether you’re considering a Traditional IRA, a Roth IRA, or exploring a backdoor Roth strategy, understanding how each works can help you make a more informed decision.
Why the Tax Deadline Matters
Unlike many workplace retirement plan contributions that must be made by December 31, IRA contributions can generally be made up until the tax filing deadline (typically April 15) for the prior year.
That means there may still be time to:
- Contribute to a Traditional IRA (deductibility may depend on income and workplace plan coverage)
- Contribute to a Roth IRA (subject to income eligibility limits)
- Evaluate whether a backdoor Roth contribution makes sense
- Potentially reduce taxable income, depending on your situation
Even if you contributed during the year, now is a good time to confirm you’ve maximized what you’re eligible to contribute.
Traditional vs. Roth: What’s the Difference?
Traditional IRA Contributions
Most individuals with earned income can contribute to a Traditional IRA. However, whether the contribution is tax-deductible may depend on your income and whether you (or your spouse) are covered by a workplace retirement plan.
Potential features include:
- A possible current-year tax deduction
- Tax-deferred growth
- Flexibility in annual contributions
If your income is above certain thresholds and you participate in an employer plan, your contribution may not be deductible. Even so, the account can still grow tax-deferred, though tracking non-deductible contributions is important for tax reporting purposes.
Roth IRA Contributions
Roth IRAs are funded with after-tax dollars, but qualified withdrawals in retirement are generally tax-free.
A Roth IRA may appeal to individuals who:
- Expect to be in a similar or higher tax bracket later in life
- Value the potential for tax-free growth
- Prefer not to have required minimum distributions (RMDs) during their lifetime
Unlike Traditional IRAs, Roth IRA contributions are subject to income limits. If your modified adjusted gross income exceeds certain levels, you may not be eligible to contribute directly.
When Income Is Too High for a Roth
For those whose income exceeds Roth contribution limits, a strategy commonly referred to as a “backdoor Roth” may be considered.
What Is a Backdoor Roth?
This approach typically involves:
- Making a non-deductible contribution to a Traditional IRA
- Converting those funds to a Roth IRA
Because there are currently no income limits on Roth conversions, this process can provide a pathway to Roth funding even when direct contributions are restricted.
When It May Make Sense
A backdoor Roth strategy may be worth evaluating if:
- Your income prevents direct Roth contributions
- You do not have significant pre-tax IRA balances
- You are focused on long-term tax diversification
One important consideration is the pro-rata rule. When converting funds to a Roth IRA, the IRS looks at all Traditional, SEP, and SIMPLE IRA balances combined. If you have pre-tax IRA assets, part of the conversion may be taxable. Understanding this rule is critical before moving forward.
For this reason, coordinating with a tax professional is often advisable.
Additional Planning Considerations
Before making an IRA contribution, it’s helpful to step back and review how it fits into your overall financial picture.
Cash Flow and Emergency Savings
Retirement contributions are intended for long-term growth. Make sure short-term needs and emergency reserves are adequately funded first.
Current vs. Future Taxes
Choosing between Traditional and Roth contributions often comes down to timing. A Traditional IRA may offer a potential tax benefit today, while a Roth may provide tax-free income later. The right choice depends on your income, goals, and long-term outlook.
Coordination with Employer Plans
If you’re contributing to a 401(k) or similar workplace plan, reviewing how an IRA complements that strategy can help create balance across accounts.
How We Help
We work with clients to evaluate IRA contribution strategies within the context of their broader financial plan. This includes reviewing income eligibility, tax considerations, retirement goals, and long-term distribution planning.
For higher-income households, we also help assess whether a backdoor Roth approach is appropriate and coordinate with tax professionals when needed. The goal is not simply to contribute, but to contribute in a way that aligns with your overall strategy.
The Bottom Line
With the tax deadline approaching, now may be a good time to review your IRA contribution options for the prior year.
Whether you’re considering a Traditional IRA for a potential current-year deduction, a Roth IRA for tax-free growth, or exploring a backdoor Roth strategy due to income limits, the right approach depends on your full financial picture.
A thoughtful review today can help keep your retirement savings aligned with your long-term goals.
Securities offered through Valmark Securities, Inc., a member of FINRA/SIPC. Investment Advisory Services offered through Valmark Advisers, Inc., a SEC Registered Investment Advisor, 130 Springside Drive, Suite 300 Akron, Ohio 44333-2431, 1-800-765-5201.
Velekei Giles Financial Advisors is a separate entity from Valmark Securities, Inc. and Valmark Advisers, Inc.
This material is for informational purposes only and is not intended to provide specific advice or recommendations for any individual, nor does it take into account the particular investment objectives, financial situation, or needs of individual investors. This information is not intended for use as tax advice. Persons should consult with their own tax advisors for specific tax advice.