How much do you plan to contribute to your self-directed IRA this year? The annual limit for IRA contributions for 2015 remains unchanged at $5,500, with an additional $1,000 contribution permissible for taxpayers aged 50 and older. Hopefully you plan to contribute the maximum allowable amount, and you’ve been making such maximum contributions every year for quite a while.
Now the trickier question; when do you plan to make those contributions? If you’re like most IRA account holders, you’ll wait until the end of the year to make your contributions. But when you think about it, there’s no reason to automatically consider your IRA contributions to be an end of the year financial matter.
By getting a head start on your annual contribution, and making the contribution to your account earlier in the year, you’ll give your money the most time and greatest opportunity to grow. Here are some tips for getting that jump on your future.
Use Your Tax Refund. If you’ve already planned for how you’re going to spend your next tax return, then you might want take another look at your plan. This might seem like a tough adjustment the first year you make the change, but if you can create a new habit for yourself it can really pay off for you in the long run.
Anticipate Future Deductibility and Make a Contribution Now. If you have a good idea of how much you’ll pay in taxes this year, and how much of a refund you expect to receive, then you may be able to find a way to bridge the gap until you receive the refund and make your deposit immediately. Again, given the significant value that can accrue from having money in your account longer, being able to shift each annual contribution up slightly earlier, even if it’s just a matter of an extra month or two each year can really boost the value of your nest egg by the time you reach retirement.
Maximize Your Prior Year Contributions First. Remember that you have until you file your prior year’s taxes (but in no case later than April 15). Still, if you haven’t been able to maximize your prior year’s contributions yet, you should first make those prior year contributions. Your annual contribution amounts are a “use it or lose it” proposition, so making sure not to lose any opportunity to make a contribution should be your primary consideration.
The specific methods you use to make your annual self-directed IRA contributions as early as possible each year will vary, depending on your other financial circumstances. But given how important this can be for your financial health during retirement, it’s worth your time and effort to do so.