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Roth IRA Deadline: What You Should Know

Roth IRA Deadline: What You Should Know

Though it is easy to ignore as a distant future event, retirement creeps up faster than you may notice. And you want to make sure that you and your family are provided for when that time comes. Fortunately, the government and businesses have grouped together to make sure that you can prepare for your financial future after retirement. One of the better tools for retirement planning is the Roth IRA. But in order to use it properly, you must understand the crucial factor of the Roth IRA deadline.

A Roth IRA is preferrable because, when specific conditions are met, this retirement plan is not taxed, allowing you to keep more of your money for your preparations for the future. Based on your age, a specific amount of money can be contributed to your Roth IRA each year, but there is a certain deadline by which the money must be contributed. Once the deadline has passed, no further funds can be contributed into your Roth IRA for that year.

While it is easy to think that missing the deadline is okay because funds can be contributed the following year, the fact is, missing your Roth IRA deadline causes you to miss out big time for your future. You can contribute every year, but you cannot go back and make up for a missed year. So if you miss out, then you have missed out on contributing an amount that could be building revenue for you to retire on.

For instance, imagine that the maximum amount you can contribute every year is three thousand dollars. That means each individual year is treated seperately, with only three thousand dollars allowed in before the Roth IRA deadline each year. If you put in only one thousand dollars before the deadline one year, you can’t make up for it by putting in five thousand dollars the next year. You can still only put in three thousand dollars the next year before the Roth IRA deadline.

So in this case, over two years of time, you have only contributed four thousand dollars into your Roth IRA. You are stuck with that smaller amount because you missed putting in the full maximum contribution before the Roth IRA deadline.

On the other hand, if you contribute the full amount both years before the Roth IRA deadline, then you will have contributed six thousand dollars over a period of two years. You have maximized the full amount you are able to put into the Roth IRA and made the best future investment possible.

Thankfully, the IRS has made the Roth IRA deadline as flexible as possible. The first date you can contribute to your Roth IRA each year is January second. The last date you can contribute is on April fifteenth of the FOLLOWING year. This gives you more than a year to make sure you contribute the full amount allowed, ensuring that your retirement account is well-funded and prepared to financially protect you after retirement.

Paying attention to your Roth IRA deadline will make a huge difference in your future. Make sure that you get your full amount in each year so you can maximize this tax-sheltered retirement plan.

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