The tax rules give you a period of 15½ months to make contributions to an IRA for any given year. For example, you could contribute to a 2010 IRA as early as January 1, 2010, and as late as April 18, 2011.
The timing of your contributions can have a significant effect on the amount your retirement fund can grow to, and if you’re contributing to a tax-deductible IRA, the timing can make a tax difference too.
Here are two bits of advice.
- First, if you didn’t reach the 2010 contribution limit ($5,000 if you’re under age 50; $6,000 if you’re over) by December 31, 2010, designate 2011 contributions as being for 2010 until you reach the dollar limit or April 18. Then you can deduct these contributions on your 2010 return for a quicker tax benefit. Use that reduction in your tax bill to fund your 2011 IRA.
- Make your contributions for each year as early in the year as you can. That gives your fund more time to benefit from tax-deferred growth. If you can’t manage a lump sum at the beginning of the year, fund your IRA with a set amount each month.
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