Tax season and retirement planning are closely connected, and the final month of the year through the first quarter of the next year present an important opportunity for members. This time frame—December through April—is when many people make “tax contributions” to retirement accounts such as IRAs and 401(k)s.

These contributions can reduce taxable income, potentially lower your overall tax bill, and help build a more secure retirement.

At TelComm Credit Union’s Retirement & Investment Center, our advisors help members understand how tax contributions work, how to take advantage of the deadlines, and whether this strategy is right for their financial situation.

What Are Tax Contributions in Retirement Planning?

Tax contributions are simply contributions to retirement accounts that may be tax-deductible or tax advantaged. By setting aside money in accounts such as a traditional IRA, you can often reduce the amount of income the IRS considers taxable for the year.

Here’s an example:

  • Let’s say your taxable income is $65,000.
  • Suppose you add $6,000 to a traditional IRA before Tax Day.
  • That $6,000 may reduce your taxable income to $59,000, depending on your eligibility and filing status.

The result is less tax owed today, and more money invested for your future.

Not every retirement contribution works this way, though. Roth IRAs, for instance, are funded with after-tax dollars, so you don’t receive an immediate tax deduction.

Instead, the benefit comes later. Qualified retirement withdrawals are tax-free. This trade-off can be powerful for members who expect their tax bracket to rise in the future.

Why Q4 and Q1 Are Key Contribution Windows

While you can make contributions year-round, the end of one year and the start of the next offer unique advantages:

  • Q4 (October–December): This is your last chance to make contributions for the current tax year if you want them counted before December 31. Many members use holiday bonuses, investment gains, or year-end tax planning to make additional deposits.
  • Q1 (January–April): Even after the year closes, you can still make contributions for the prior year until Tax Day (usually April 15). This extension gives you flexibility if you need more time to save or want to adjust based on your tax filing.

This two-part window allows you to maximize contributions and make last-minute adjustments depending on your tax situation.

How Tax Contributions Work

Understanding how contributions actually function can take some of the mystery out of retirement planning. Here are the key points:

  1. Choose the Right Account
    • Traditional IRA: Contributions may be deductible, lowering current taxable income. Money you withdraw in retirement is treated as regular taxable income.
    • Roth IRA:  Contributions aren’t deductible now, yet eligible withdrawals in retirement are free of taxes.
    • 401(k) or Employer-Sponsored Plans: Contributions are pre-tax, often paired with employer matches, and grow tax-deferred.
  2. Follow IRS Limits
    • For 2025, individuals can contribute up to $7,000 annually to an IRA ($8,000 if age 50+).
    • For 401(k) plans, the limit is significantly higher, at $23,000 ($30,500 if age 50+).
  3.  Take Advantage of Deadlines
    • IRA contributions can be made until Tax Day for the prior year.
    • Contributions to employer plans usually have a December 31 deadline.
  4. Enjoy Dual Benefits
    • Immediate benefit: Lower taxable income (if using traditional accounts).
    • Long-term benefit: Compounding growth of your investments over decades.

Is Making Tax Contributions Right for You?

Contributions are optional—you aren’t required to make them. However, they are a powerful tool for many members. Consider contributing if you:

  • Would like to lower your taxable income this year.
  • Have not yet maxed out your retirement contributions.
  • Received a year-end bonus or windfall you’d like to put to work.
  • Are at least 50 years old or older; you may be eligible for “catch-up” contributions.

For certain members, pausing contributions could be the smarter choice. If you need liquidity for emergencies, are paying down high-interest debt, or are already contributing heavily through work, you might decide to skip or limit contributions this cycle.

That’s why reviewing your financial plan with an advisor at the Retirement & Investment Center is so valuable.

Investment Impact: Why Contributions Matter Beyond Taxes

The real power of tax contributions lies not just in reducing today’s tax bill but in what those contributions become over time. With compounding, even modest deposits can make a big impact on your future savings.

Example:

If you contribute $6,000 to an IRA at age 35 and earn an average annual return of 7%, that single contribution could grow to more than $45,000 by age 65.

Now imagine making contributions every year—your retirement savings can multiply into hundreds of thousands of dollars. That’s why seizing opportunities during Q4 and Q1 is so important.

Frequently Asked Questions About Tax Contributions

Q: Am I allowed to contribute to an IRA if I already have a 401(k)?
Yes. You can contribute to both, though your ability to deduct IRA contributions may be limited if you or your spouse participate in a workplace plan and your income exceeds certain thresholds.

Q: What if I miss the Tax Day deadline?
Contributions after April 15 will apply to the current year, not the prior year. Planning ahead ensures you don’t miss out.

Q: Are contributions locked away until retirement?
Generally, yes. Withdrawals before age 59½ may face penalties and taxes, though there are some exceptions (like first-time home purchases or qualified education expenses for IRAs).

How the Retirement & Investment Center Can Help

Tax contributions can feel overwhelming—especially when deadlines, limits, and account types all overlap. That’s where the Retirement & Investment Center at TelComm Credit Union comes in.

Our experienced advisors can help you:

  • Determine whether traditional or Roth contributions fit your situation.
  • Evaluate your eligibility for tax deductions.
  • Maximize contributions within IRS limits.
  • Grow retirement savings in line with your long-term priorities.
  • Develop a year-round strategy, so you aren’t rushing at the last minute.

With personalized guidance, you’ll know you’re making the most of every dollar you set aside for retirement.

Take the Next Step

Tax contributions are more than just numbers on a tax return—they are opportunities to reduce today’s taxable income, build tomorrow’s retirement, and keep your financial goals on track.

The Q4–Q1 contribution window is your chance to act. Don’t let it pass by without reviewing your strategy.

Call the TelComm Retirement & Investment Center today at 417.891.1007 or visit TelCommCU.com to schedule a consultation. Let’s make sure your contributions work as hard as you do.

TelComm Retirement & Investment Center and its advisors do not provide tax or legal advice. The information in this article is for educational purposes only and should not be considered individualized financial, tax, or investment guidance. Members should consult a qualified tax professional or financial advisor before making any investment or contribution decisions.