Most IRA account holders have contributed to their accounts for the 2013 tax year even though they technically have until the April 15th tax due date to do so. Having said that, there are number of reasons why you should have contributed in January of the preceding year.
Why wait until the end of the year to contribute to your IRA?
There are still a large number of IRA account holders that wait until January to April 15th of the following year to contribute to their account. In some cases, this is for valid reasons. For instance, the IRA account holder may not have a reasonable estimate of their expected income for the year. However, if you do have knowledge of your income and your likely eligibility, there are more reasons to contribute to your IRA account in the beginning of the year than to wait until the following year.
Delaying IRA contributions can translate into less gains?
Assuming the market is going up, you will lose out on over a years worth of investment gains if you decide to delay contributions until the beginning of the following year. In addition, the gains compound every year if you decide to contribute in the beginning of each year. For instance, the difference between an IRA account holder that contributes in the beginning of each year versus one that waits until the following year, could be in the tens of thousands of dollars by the time the taxpayer reaches retirement age.
Pay less in taxable gains
By contributing to your IRA in the beginning of the year, you also avoid paying taxes on any gains. There could be significant tax savings by putting money towards these tax-advantaged accounts in the beginning of the year. The savings also compounds each year.
More Questions? Try our professional tax research.
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