Before you know it, we'll find ourselves facing April 15th, the deadline for filing tax returns. April 15 is also the last day you can make a contribution to your individual retirement account for the prior tax year (2025) if you haven't done so already -- whether or not you've filed your 2025 tax return.

The maximum IRA contribution permitted for 2025 is the smaller of 1) $7,000 or 2) your taxable compensation for 2025. Another limit applies if you were age 50 by the end of 2025: You can contribute the smaller of 1) $8,000 or 2) your taxable compensation for 2025. For example, if you are age 20 and you made $3,000 working part time in 2025, the maximum 2025 contribution you can make is $3,000. If you are age 55 and you earned $50,000, the maximum for you is $8,000 for 2025.

You also can contribute for 2026 now. The caps are higher: The maximum for 2026 is $7,500, or $8,600 if you're age 50 or older by the end of 2026 (tinyurl.com/yeaf67yy).

If you already have an IRA, you'll want to reach out to your IRA custodian for help making your contribution. If you do not have an IRA, you can open an IRA online with an IRA custodian (search for "open an IRA"). Your research might take you to Fidelity (fidelity.com) or Vanguard (vanguard.com), among others. (Full disclosure: I'm not connected with either institution.)

These custodian websites are rich with helpful resources that go beyond what I can supply in the space of this column, including details on the differences between tax-deferred traditional IRAs and tax-free Roth IRAs, who qualifies for either type, and how tax deductions and tax credits come into the picture. For an in-depth understanding of how IRAs work, download and read the IRA account application you'll find on the websites.

If you are not funding your retirement because you simply can't afford to do so, consider this: You may qualify for "free money" to help get you started. Called the Retirement Savings Contributions Credit (Saver's Credit for short), the credit reduces your taxes dollar for dollar up to $1,000 ($2,000 if married filing jointly). If you have a tax bill of $1,000 and apply for a credit of $1,000, you pay zero taxes, freeing up $1,000 for you to deposit into your IRA.

Do take the time to see if you qualify for the credit by using IRS Form 8880 (tinyurl.com/4xkxjdf2). For instance, you will not qualify if your "adjusted gross income" (the amount on Form 1040, line 11a) is more than $39,500 ($59,250 if head of household; $79,000 if married filing jointly). Read more at the IRS webpage on the Retirement Savings Contribution Credit (tinyurl.com/4rzd7xj5).

According to the Investment Company Institute (ICI), 70% of all U.S. households (94.4 million) own a defined contribution plan account (401(k), 403(b)) or an IRA. About 2 out of 5 (44%) U.S. households have IRAs (data as of 2024), a big improvement from a decade ago, when only 1 of 3 U.S. households had IRAs (tinyurl.com/mr29jv3v). As of September 2025, 401(k) plans "served 70 million active participants, as well as millions of retirees." Overall, retirement assets totaled $48 trillion in the third quarter of 2025 (tinyurl.com/az6pnf6v).

If you are not taking advantage of IRAs, take this opportunity to start now.

And if you already filed your return for tax year 2025 and are just now making an IRA contribution for that year? Consult with your tax adviser about whether you need to file an amended return (1040-X). Additional information is available at the IRS webpage "File an amended return" (tinyurl.com/ys63cxwr).

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

Like it or not, inheriting a tax-deferred IRA calls for action, due to laws that require the beneficiary to withdraw funds (and pay taxes on the withdrawals). And it's not that simple, since the law treats beneficiaries differently.

The one commonality is that a minimum amount must be withdrawn from the IRA on a timely basis and in almost all situations will be taxable as income. That leads to a question from a reader of this column. "Seth" believes the required minimum distributions (RMDs) on an inherited IRA will push him into a higher tax bracket. He wants to know if there is a way to avoid that. Basically, he is asking whether there is a way to fulfill RMD requirements while at the same time save taxes.

This is an excellent question that calls for tax expertise, not just to save taxes, but also to prevent penalties for not taking withdrawals on a timely and accurate basis. It is imperative that Seth consult with his tax adviser or CPA before deciding on a course of action, as every person's financial and tax situations are unique.

There are resources available for you to read on background, but be careful, since some online resources are out of date. This is due to the changes that came about as a result of the passage of the SECURE Act in 2019 and SECURE 2.0 in 2022, and the interpretations that followed.

To prepare, let me share a few ideas.

First, confirm the rules that apply to you as a beneficiary. Don't assume anything. Beneficiary rules differ based on who you are in relation to the deceased. Surviving spouses have the most flexibility. Minor children have different rules, as do beneficiaries who inherit from an IRA owner who was already taking RMDs on his own IRA before passing away (typically someone over age 73).

Second, see if there is flexibility in the timing of withdrawals. Namely, certain beneficiaries have more time than others to empty out an inherited IRA. "Eligible Designated Beneficiaries," or EDBs, may be able to "stretch" withdrawals over their own lifetimes, potentially well beyond the 10-year withdrawal period that applies to non-EDBs.

Third, if there is flexibility, that can open doors to manage the timing of withdrawals. For example, if you inherit a traditional IRA from someone who died under age 73 (technically before their "required beginning date"), he was not already taking RMDs of his own. That beneficiary must empty out the inherited IRA by Dec. 31 of the 10th year following the death of the IRA owner. There is no requirement to take out any withdrawals before then, giving you some flexibility to manage withdrawals year by year with the goal of avoiding creeping into a higher tax bracket.

On the other hand, if the IRA owner had reached his RBD (usually after age 73), the beneficiary cannot wait until the 10th year to empty out the account. Instead, he would have to start taking RMDs in years one through nine as well.

Fourth, consider what you will do with the withdrawn funds. Will you spend the money? Will you keep it and invest it? Someone creative might think of rolling over those withdrawals into another IRA of their own, but that won't work under the rules (with an exception for surviving spouses). However, you could use some of the proceeds to do a fresh contribution to your own IRA if you haven't already done that for 2026, assuming you have earned income for the year. The contribution limit for 2026 is $7,500 ($8,600 if you are 50 or older).

One more thought: If you, the beneficiary, are over 70 1/2, you can donate the RMD to charity and avoid taxes altogether by following QCD rules (qualified charitable distributions). (If you would like more information on QCDs let me know.) IRS Publication 590-B can be a useful resource (tinyurl.com/47h9utkb).

Again, because of the complicated rules and the importance of an individual's financial situation, Seth will want to consult with his tax adviser or CPA to plot the best path forward, one that involves the least amount of increase in taxes for him.

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One of the benefits of being age 50 or older is a "catch-up." Created by the Economic Growth and Tax Relief Reconciliation Act of 2001 (tinyurl.com/p6c736e6), catch-ups help future retirees with enhanced opportunities to save on a tax-advantaged basis.

This year (2026), those age 50 and older who are contributing to 401(k), 403(b) and 457 plans can set aside $8,000 more than those under 50 for a total allowable contribution of $32,500. Those under 50 are limited to $24,500.

If you turn 60, 61, 62, or 63 this year, your catch-up is $11,250 instead of $8,000, for a total allowable contribution of $35,750 (provided your company's plan allows for this type of "super" contribution).

When you add the amount that your employer can contribute to the plan on your behalf, the overall limit for 2026, counting contributions by the employer and the employee, is $72,000 for those under age 50. For those 50 or older, the top limit is $80,000, except for those age 60 to 63, which is even higher at $83,250.

If you consider how many people take advantage of catch-ups, you can probably imagine it's not many. That's a problem, since we're talking about a potentially vulnerable group of "under-savers" who are getting close to retirement without sufficient retirement nest eggs.

Vanguard's "How America Saves 2025" report, which uses data from more than 1,400 qualified plans and nearly 5 million participants, offers some insight (tinyurl.com/486xmx4c). About half (51%) of those with incomes over $150,000 took advantage of catch-ups (if offered) in 2024, but only 16% of eligible participants of any income level did so.

Forty-nine percent of participants with incomes of more than $150,000 contributed the maximum allowed, and so did 41% of those with an account balance of more than $250,000.

Those participants who took advantage "tended to have higher incomes, were older, had longer tenures with their current employer, and had accumulated substantially higher account balances," stated the Vanguard report.

During 2024, 14% of participants of any age saved the then-maximum amount of $23,000 (or $30,500 for those 50 and older).

A recently released report by the Public Retirement Research Lab (PRRL), a collaborative effort of the Employee Benefit Research Institute and the National Association of Government Defined Contribution Administrators, offered a similar scenario.

Utilizing data from the 2023 PRRL Database 2, which included more than 900,000 participants representing 208 different plans, the percentage of participants eligible to make catch-up contributions was 36%, and of those, 5% chose to participate (tinyurl.com/mvycdtu6). Of those who did make catch-up contributions, 24% earned more than $150,000.

The reality is that for some with lower incomes, catch-ups are simply unaffordable. For others with higher incomes and insufficient savings, catch-ups can be lifesavers. Certainly, "super savers" will benefit (described by the Principal Financial Group as those who save 15% or more of their income for retirement, or at least 90% of the maximum allowed -- tinyurl.com/p3vz3ax5).

Before leaving this subject, there is another type of catch-up that is geared to employees who make $150,000 or more. Starting this year, for those who exceed FICA-taxable earnings of $150,000 in 2025, the catch-up will be recorded in after-tax dollars instead of pre-tax. That means that the catch-up will count as part of your W-2 income. To find out more about this 2026 change, read Fidelity's "Understanding new Roth 401(k) catch-up rules" (tinyurl.com/4dffwkwd).

For those with incomes below $150,000, the catch-up will be accounted for in pre-tax dollars, meaning those funds will not count as W-2 income, giving them the advantage of saving money on taxes. (Note that some company plans may offer after-tax catch-ups.)

Whether or not to do a catch-up will turn on your personal financial situation.

In the end, you'll want to engage your tax adviser or investment adviser before making a final decision. The most important exercise will be making sure that you are on track to meet your retirement goals.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION