IRA Contribution Planning

Tax season rolls around and you panic-contribute $6,500 to an IRA at the last minute because your accountant told you it would save on taxes. But you have no idea if you put it in the right type of IRA, whether you’re even eligible to deduct it, or if Roth would’ve been better. You’re just guessing and hoping it works out.

Most Phoenix professionals know they “should” contribute to an IRA, but they don’t have a real strategy. They don’t know how much to contribute, which type makes sense (Traditional vs Roth), whether they’re over the income limits, or how IRA contributions fit into their overall retirement plan.

We help you figure out your IRA contribution strategy based on your income, tax situation, retirement goals, and timeline. You’ll understand which type of IRA makes sense, how much to contribute, and whether you should be using backdoor strategies if you make too much for direct Roth contributions.

Traditional vs Roth: Which One?

Traditional IRAs give you a tax deduction now and tax-deferred growth, but you’ll pay taxes on withdrawals in retirement. Roth IRAs don’t give you a deduction now, but your money grows tax-free and comes out tax-free in retirement.

If you’re in a high tax bracket now and expect to be in a lower bracket in retirement (common for high earners in their peak earning years), Traditional IRA contributions make sense—take the deduction now when it’s worth more.

If you’re in a low tax bracket now or expect to be in a higher bracket later (common for younger professionals early in their careers), Roth IRA contributions make sense—pay taxes now when they’re cheap and enjoy tax-free withdrawals later.

If you’re married filing jointly making over $240,000 or single making over $165,000 (2024 limits), you can’t contribute directly to a Roth IRA. But there’s a legal workaround called the backdoor Roth that lets you get money into a Roth anyway—we’ll show you how.

How Much Should You Contribute?

For 2024, you can contribute up to $7,000 to an IRA ($8,000 if you’re 50 or older). But should you max it out? Maybe. Depends on your other priorities.

If you’re not maxing out your 401(k) employer match, do that first—it’s free money. If you have high-interest debt (credit cards at 20%), pay that off before funding an IRA. But if you’ve got the basics covered and you’re trying to build wealth, maxing out your IRA is one of the smartest moves you can make.

Over 30 years, maxing out an IRA at $7,000/year with 7% average returns gives you over $700,000. That’s real wealth, and it’s all from contributing $583/month consistently. Most Phoenix professionals can afford that if they prioritize it.

Arizona Tax Considerations

Arizona doesn’t tax Social Security benefits and has relatively low state income taxes compared to California or other high-tax states. That affects your Traditional vs Roth decision.

If you’re planning to retire in Arizona, the state tax benefits of Traditional IRA contributions are smaller than they’d be in high-tax states. That tilts the math slightly toward Roth contributions for Arizona residents, especially if you expect federal tax rates to increase in the future.

What We Do

We review your income, tax situation, existing retirement accounts, and goals. We show you how much you can contribute to an IRA based on income limits and eligibility rules. We explain whether Traditional or Roth makes more sense for your situation. We walk you through backdoor Roth strategies if you’re over the income limits.

You’ll leave with a clear IRA contribution plan that fits into your overall retirement strategy—not just a last-minute panic contribution in April.

The Bottom Line

IRA contributions are one of the most powerful wealth-building tools you have, but only if you’re using them strategically. Don’t guess about which type to contribute to or how much to put in. Figure out what actually makes sense for your income and goals.

Want to make sure you’re using IRAs correctly? Let’s review your contribution strategy and build a plan.