Finish off 2022 as soon as possible

Once you’ve contributed the maximum for the 2021 tax year, you can then look to maximizing your 2022 Roth contributions. The ideal scenario for someone who didn’t contribute to their Roth IRA in 2021 is to do both on Jan. 1st: Add the maximum allowed for 2021 first, and then add the maximum allowed for 2022 shortly after. For those under 50, this amounts to a total contribution of $12,000 ($14,000 for those over 50).

The key benefit of doing this sooner rather than later is that your money has more time to compound in a tax-free manner; the effect is amplified because Roth space is uniquely valuable, and there isn’t much space to begin with. So it’s smart to take advantage of everything you can, while you still can.

It’s also good to know that you can withdraw Roth contributions at any time, both tax- and penalty-free. If you’re under 59.5 and you tap Roth IRA money before five years have elapsed since account opening, you’ll have to pay taxes and penalties on the earnings portion of your withdrawal.

In summary, it’s best to open your Roth IRA as soon as possible and avoid taking anything from it until you’ve reached age 59.5. Think of your Roth IRA as the core of your nest egg — if you can avoid touching it, you’ll be far better off in the long run.

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