IRA Contribution Deadlines Most People Don’t Understand

If you are planning of funding a Traditional or Roth IRA for last year, you have to get your check in the mail no later than April 15th. Even if you file for an extension, you still have to fund these retirement accounts by April 15th. If you don’t, you won’t be able to claim a deduction.

While there is nothing you can do about that deadline, don’t make the mistake of thinking you have to open a new account or invest the money by that time. Some people feel they have to do both each year and that’s just not true.

In most cases, you can add this year’s contribution to an existing IRA account. This is very fast and very easy. To do so, just call the custodian and ask them what to do. You might even be able to fund your IRA without even going in to their office. For example, if you have a non-retirement account with cash in it, you should be able to move money from that account to your IRA with verbal instruction alone.

How Should You Invest This Year’s Contribution?

While you do have some real time constraints and pressure to get that money into your IRA, you still have plenty of time to decide how to invest the money. This is still true even if you are adding it to an existing IRA in almost all cases. (The only exception is if you have an IRA annuity. But since those are terrible investments anyway, I’m going to assume that isn’t the case for you.)

For example, let’s say you only have one IRA account but you don’t particularly like it. You are upset because you feel like you have to put more money into that IRA since you have no time to set up a new account someplace else.

No worries Pilgrim. Get the money to the existing custodian but tell them to keep it in the money market rather that investing it. Every fund company has money markets so don’t let anyone tell you anything different. As long as the money is sent to the mutual fund company by April 15th, you can claim your IRA contribution. From the IRS standpoint, it doesn’t matter if the contribution is invested or sitting in money market. From the taxman’s perspective, the contribution was made on time. As long as you send the money to the custodian before the deadline you can take your sweat time about finding the right investment afterwards.

If that means you need to move the account to a new custodian, so be it. You have all the time in the world to get that done so breathe easy.

You still have a few days left to get your IRA funded for last year. Are you going to take advantage of it? If not, why not?