Retirement, HSA & Coverdell Accounts: Key Moves to Make Before April 15

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Tax season is upon us. We think this is the ideal time to review your tax-advantaged account activity and act on or before your tax deadline—generally, April 15—in order to maximize the potential benefits of these powerful savings vehicles. Among the possibilities:

Contributing to a traditional or Roth IRA
Contributing to a Roth IRA for a child
Contributing to a Health Savings Account (HSA)
Taking a deferred 2024 required minimum distribution on or before April 1

Here, we’ll look at these and other moves to consider before the calendar turns to April 15.

1. Contribute to a traditional or Roth IRA

Tax season serves as the time when many individuals fund their IRAs by contributing for the prior tax year. Contributing to an IRA may seem straightforward, and in many ways, it is. But there can be twists.

Even in early 2025, you remain eligible to make a 2024 IRA contribution, commonly referred to as a “prior year” contribution. The deadline for making a 2024 IRA contribution is April 15, 2025. Notably, a tax filing extension does not provide additional time to make a 2024 IRA contribution.

Making a prior year contribution requires you to notify your IRA provider so they can correctly process the transaction. If you don’t, the financial institution may inadvertently code your contribution for the current year (i.e., 2025), which can be problematic.

The maximum amount that can contributed to a traditional or Roth IRA for both 2024 and 2025 is $7,000 for those individuals under age 50 and $8,000 (including the age 50 catch-up contribution) for those age 50 and older.

Anyone, regardless of age, can contribute to a traditional or Roth IRA. However, current eligibility rules require an individual to have compensation from their job or from self-employment. Although, If you do not have compensation and file a joint tax return but your spouse does, you can make an IRA contribution based on your spouse’s taxable compensation (commonly referred to as a “spousal IRA”). Your total contributions to both your IRA and your spouse's IRA may not exceed your joint taxable income or the annual contribution limit on IRAs times two, whichever is less. Notably, it doesn't matter which spouse earned the income.

Many individuals can deduct their traditional IRA contributions. However, for active participants in employer plans and their spouses, the ability to deduct an IRA contribution will phase out for those with higher incomes.

A Roth IRA, like a traditional IRA, requires an individual to have earned income. It also requires satisfying an annual income threshold that is dependent on tax filing status and modified adjusted gross income (MAGI). (See this explainer from the IRS.)

Note: A prior year SEP-IRA contribution has a different funding deadline.

2. Fund a Roth IRA for a child

There is no minimum age to establish a Roth IRA. Instead, any individual that has compensation (earned income) can establish and fund such an account. Furthermore, anyone can fund the Roth IRA up to the amount earned by the minor. Contributions cannot exceed $7,000 for the 2024 tax year.

3. Take advantage of the Saver’s Credit

The Retirement Savings Contribution Credit is a nonrefundable federal income-tax credit available to individuals with an adjusted gross income (AGI) of less than $76,500 in 2024. To qualify, a taxpayer must make a contribution to a 401(k), 403(b), governmental 457(b), SIMPLE IRA, traditional IRA, Roth IRA, SAR-SEP IRA, or Section 529 ABLE account.

The maximum annual contribution eligible for the credit is $2,000, and the maximum credit is 50%, making the maximum saver’s credit $1,000.

4. Fund a Health Savings Account

A 2024 Health Savings Account contribution, like an IRA, can be made as late as April 15, 2025.

You may be eligible to contribute to an HSA if you are enrolled in a high-deductible health plan. (See the related IRS explainer.) An HSA is a triple-tax-advantaged account (tax-deductible contribution, tax deferral, and tax-free distributions of earnings) designed to help the account holder cover future medical expenses. In 2024, an eligible individual with single coverage can contribute $4,150. For those with family coverage, the limit is $8,300. A $1,000 catch-up contribution is available to those individuals aged 55 and older.

5. Take a deferred 2024 Required Minimum Distribution

If you turned age 73 in 2024 and will be taking your initial Required Minimum Distribution (RMD), you can delay it until April 1, 2025 (not April 15^th). You will however be subject to two RMDs in calendar year 2025—both your delayed 2024 and in-year 2025 RMDs.

If you’re actively employed past age 73, RMDs are generally not required from your 401(k)—until the year you retire. This rule is called the “still-working exception” and is available only if you do not own more than 5% of the company sponsoring the retirement plan, and the plan offers it. In other words, the still-working exception is discretionary. We suggest checking with your employer to see if it’s available.

6. Establish a Solo 401(k)

Secure Act 2.0 (Section 317) added retroactive, first-year elective deferrals for sole proprietors and single-member LLCs. More specifically, effective for plan years beginning after December 29, 2022, these employers can make employee contributions (i.e., pre-tax deferrals, Roth or after-tax contributions) to a Solo 401(k) up to the employee’s tax return filing due date, determined without regard to any extensions, for the initial year. In other words, an individual who owns the entire interest in an unincorporated business and who is the only employee of such business, can adopt a new Solo 401(k) plan after the end of the taxable year and—for the first year only—can elect to defer net earnings from self-employment in the prior year as late as the due date for the individual's tax return.

7. Fund a Coverdell Education Savings Account

The deadline to establish and/or fund a Coverdell Education Savings Account (ESA) for 2024 is April 15, 2025. The total contributions for the beneficiary cannot exceed $2,000 in any year, no matter the number of accounts established. Any individual can contribute to an ESA if their household income (MAGI) for the year is less than $110,000. For married couples filing joint returns, the threshold increases to $220,000.

Questions? Please contact your Lord Abbett representative at 888-522-2388.

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About the Author

Brian Dobbis, QKA, QPA, QPFC, TGPC

Retirement Solutions Lead

Important Information

The information provided is not directed at any investor or category of investors and is provided solely as general information about Lord Abbett's products and services and to otherwise provide general investment education. None of the information provided should be regarded as a suggestion to engage in or refrain from any investment related course of action as neither Lord Abbett nor its affiliates are undertaking to provide impartial investment advice, act as an impartial adviser, or give advice in a fiduciary capacity. If you are an individual retirement investor, contact your financial advisor or other fiduciary about whether any given investment idea, strategy, product, or service may be appropriate for your circumstances.

To comply with Treasury Department regulations, we inform you that, unless otherwise expressly indicated, any tax information contained herein is not intended or written to be used and cannot be used, for the purpose of (i) avoiding penalties that may be imposed under the Internal Revenue Code or any other applicable tax law, or (ii) promoting, marketing, recommending to another party any transaction, arrangement, or other matter.

These materials do not purport to provide any legal, tax, or accounting advice.

A 401(k) plan is a qualified plan that includes a feature allowing an employee to elect to have the employer contribute a portion of the employee’s wages to an individual account under the plan. The underlying plan can be a profit-sharing, stock bonus, pre-ERISA money purchase pension, or a rural cooperative plan. Generally, deferred wages (elective deferrals) are not subject to federal income tax withholding at the time of deferral, and they are not reported as taxable income on the employee’s individual income tax return.

A 403(b) plan, also known as a tax-sheltered annuity plan, is a retirement plan for certain employees of public schools, employees of certain Code Section 501(c)(3) tax-exempt organizations and certain ministers. A 403(b) plan allows employees to contribute some of their salary to the plan. The employer may also contribute to the plan for employees.

Plans of deferred compensation described in IRC section 457 are available for certain state and local governments and non-governmental entities tax exempt under IRC Section 501. They can be either eligible plans under IRC 457(b) or ineligible plans under IRC 457(f). Plans eligible under 457(b) allow employees of sponsoring organizations to defer income taxation on retirement savings into future years.

A SIMPLE IRA is a retirement plan that may be established by employers, including self-employed individuals. The employer is allowed a tax deduction for contributions made to the SIMPLE. The employer makes either matching or nonelective contributions to each eligible employee’s SIMPLE IRA, and employees may make salary deferral contributions.

Traditional IRA contributions plus earnings, interest, dividends, and capital gains may compound tax deferred until you withdraw them as retirement income. Amounts withdrawn from traditional IRA plans are generally included as taxable income in the year received and may be subject to 10% federal tax penalties if withdrawn prior to age 59½, unless an exception applies.

A Roth IRA is a tax-deferred and potentially tax-free savings plan available to all working individuals and their spouses who meet the IRS income requirements. Distributions, including accumulated earnings, may be made tax free if the account has been held at least five years, and the individual is at least 59½, or if any of the IRS exceptions apply. Contributions to a Roth IRA are not tax deductible, but withdrawals during retirement are generally tax free.

The information is being provided for general educational purposes only and is not intended to provide legal or tax advice. You should consult your own legal or tax advisor for guidance on regulatory compliance matters. Any examples provided are for informational purposes only and are not intended to be reflective of actual results and are not indicative of any particular client situation.

The information provided is not directed at any investor or category of investors and is provided solely as general information about Lord Abbett’s products and services and to otherwise provide general investment education. None of the information provided should be regarded as a suggestion to engage in or refrain from any investment-related course of action as neither Lord Abbett nor its affiliates are undertaking to provide impartial investment advice, act as an impartial adviser, or give advice in a fiduciary capacity. If you are an individual retirement investor, contact your financial advisor or other fiduciary about whether any given investment idea, strategy, product or service may be appropriate for your circumstances.

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