IRA plans are an excellent way for individuals to save money for retirement. They allow people to deposit a maximum of $5,500 per year ($6,500 for individuals over the age of 50) into an account that will continue to grow over the years until they decide to retire from the workforce and live off their savings. Even though this might not sound like a lot of money, by the time you get to retirement age, you could have a pretty nice nest egg waiting for you. That is, if you don’t miss the IRA contribution deadline.
Now, it would be easy to assume that the deadline for IRA contributions for any given year would end on December 31, since that is the deadline for any wages earned during the year. However, you would be incorrect. You actually have until April 15 of the following year to max out your contributions to your IRA. This deadline applies to both Roth and traditional IRA plans.
What Happens if You Miss the IRA Contribution Deadline?
Missing deadlines usually comes with some sort of penalty. Otherwise, what would be the point of having a deadline in the first place? Fortunately, you will not be assessed any kind of penalty if you do not meet the deadline for contributing to your IRA. However, you will be missing out on money that could be going toward your retirement. For example, if you have only contributed $1,000 to your IRA this year and you miss the IRA contribution deadline, which would fall on April 15, 2014, you will be missing out on $4,500 toward your retirement.
Not only that, but you are losing all of the growth that $4,500 would make over time in your account. Remember: your money doesn’t just sit there. It generally makes more money depending on the funds you invest in. However, if your money isn’t in the account by the deadline, it can’t make any money, meaning you will have less money in your IRA when you need it most: after you retire.
When Should I Contribute so I don’t Miss the Deadline?
Just because you can wait until April 15 to contribute to your IRA doesn’t mean you should. There are all sorts of roadblocks that could pop up at the last minute that could prevent you from meeting the deadline. For example, if your check is not accepted for any reason, you won’t get a second chance to put that money in the account.
To avoid this situation, you should contribute to your IRA whenever you have the funds to do so throughout the year. Some people like to wait until the last month or so before the deadline because they want to keep the money out of the account for as long as possible.
Unfortunately, this sometimes leads to deciding not to contribute to the account at all. When April rolls around and they are short on funds, they decide to put off contributing at all. You are much better off contributing at regular intervals throughout the year so you don’t have to take the financial hit all at once.
If you do not have an IRA yet, you can open one for 2013 all the way up until April 15, 2014. What’s better is that you can still contribute the maximum amount to your IRA as long as you meet the IRA contribution deadline, which is the exact same day. Again, it is not recommended that you wait until April 15 to open an IRA account, but the option is there if you are an expert procrastinator. No matter what, though, if you do open an IRA account before the deadline, contribute to the 2013 limits before you apply any funds to your 2014 limits. This is because you will never have the opportunity to contribute to your 2013 limits again once the deadline passes.
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