The Roth IRA Deadline Is April 15
IRA deadlines, contribution and income limits, etc are set by calendar years, but the actual Roth IRA deadline (as well as the that of the less-popular Traditional IRA) is oriented around the tax year, not calendar year. You might have been forgiven for thinking that once the clock struck midnight on New Years Eve this year, your ability to make 2009 IRA contributions would be gone forever. But you’d have been wrong!
The Roth IRA Deadline Is April 15
Not content to keep things simple and cut off IRA contributions on December 31st like any reasonable person would, the IRS has deemed fit to make the Roth IRA deadline the same as the tax filing deadline, or April 15 in most years. While this is bad news for your accountant (seems like a confusing thing to keep up with, and it’s not like the Roth IRA rules aren’t already complicated enough), it’s a good thing for your retirement.
This means if you suffered a period of unemployment last year but have recently gotten back on your feet, you can retroactively contribute up to your your $5,000 2009 Roth IRA contribution limit. Also, if you’ve so far been unwise enough to go without, you can retroactively start a Roth IRA for the 2009 tax year rather than using up your 2010 contribution.
Why Is This A Big Deal?
Lest you be tempted to let the Roth IRA deadline pass you by without taking advantage of the opportunity to max out your yearly Roth contribution, consider that the Roth IRA is, bar none, the absolute best tax deal Uncle Sam will ever give you (the primary residence capital gains tax exemption is a close second). While your Roth contributions are all done with after-tax money, every single cent your Roth IRA earns from now until eternity is tax-free forever. Without the drag of taxes, even relatively modest Roth IRA rates of return can end up a tidy sum if left alone. By contrast, contributions to 401k plans and Traditional IRAs are steeply taxed at retirement (as regular income, eek!).
In short, don’t look a gift horse in the mouth and consider the Roth IRA deadline extension a fortunate opportunity to make up for past shirking of your retirement savings duties. You’ll be glad you did when you’re 70.
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