The Roth IRA Deadline

What is the Roth IRA deadline?

If you still haven't made your maximum contribution for the year, you need to know the deadline for making a Roth IRA contribution.

Why?

Because once you miss your contribution window, it's gone forever.

That's right... Forever.

While it's true that if you miss the deadline, you're free to make another contribution for the following tax year, you never get another opportunity to make a contribution for a missed tax year.

For instance, let's say you're eligible to contribute a maximum of $5,000 per year to your Roth IRA.

Under the rules, you can't contribute $3,000 in 2011 and $7,000 in 2012.

If all you manage to contribute in 2011 is $3,000, then the maximum you can contribute in 2012 is still only $5,000. You don't build up a contribution credit from one year to the next.

So if you fail to make the Roth IRA deadline and to contribute the maximum amount for any given year, you lose that opportunity permanently. You don't get to go back and make up for lost time.

Add that to the fact that the more funds you contribute, the more funds you have growing tax-free in preparation for retirement, and...

Do you see now why it's so important to know the Roth IRA deadline for making a contribution?

A Roth IRA Tax Year

Your maximum annual Roth IRA contribution applies to a specific tax year and not just any rolling 12-month period.

So what constitutes a Roth IRA tax year?

It's essentially the same as a regular calendar year.

The tax year runs from January 1st to December 31st of the calendar year.

What does this mean?

It means your Modified Adjusted Gross Income (MAGI), meaning your compensation income for that calendar year, forms the basis for your Roth IRA contributions. And any contributions you make to your Roth IRA out of that income go to fund your Roth IRA for that particular tax year.

Find that confusing?

Let's look at an example...

Let's say you earn $50,000 in compensation income between January 1, 2012 and December 31, 2012. Your maximum annual Roth IRA contribution is $5,000. So if you contribute $5,000 of that $50,000 to your Roth IRA, your contribution counts for the 2012 tax year.

It's really that simple!

So does that mean any Roth IRA contributions you make in 2012 count toward the 2012 tax year?

No.

Not always.

In some cases, you can make a Roth IRA contribution in calendar year following the tax year for which the contribution counts.

So the Roth IRA deadline is NOT December 31st of the calendar year.

Just keep reading, and you'll learn all the rules and important dates...

When You Can Make a Roth IRA Contribution

Under IRS rules, you can NOT make a Roth IRA contribution for a given tax year until January 2 of the tax year in question. That's the first day you can make a legal Roth IRA contribution.

But don't worry... It's highly unlikely you'll accidentally make an early Roth IRA contribution.

Most brokerage firms, banks, and other Roth IRA custodians don't allow contributions until January 2 by default. So it's unlikely they'll let you fund your account prior to that date.

Do all these dates sound confusing?

They don't have to be.

Here's what they really mean...

If it's December 31, 2010, you can't make a Roth IRA contribution for the tax year 2011. After all, you can only fund a Roth IRA with earned income, and how can you have earned income for the year 2011 when it's still 2010?

On the flip slide, assuming you make $50,000 per year and are eligible to contribute up to $5,000 per year, you're free to make a $5,000 Roth IRA contribution toward the current tax year on January 2 of that tax year... Even though it's highly unlikely you earned $5,000 in two days.

Regardless, the key fact to remember is you can NOT make a Roth IRA contribution prior to January 2 of the tax year in which you're making your contribution. You must wait until at least that day...

So if January 2 is the starting point for making a Roth IRA contribution, it begs the question...

What day is the deadline for making a Roth IRA contribution?

Roth IRA Deadline

The Roth IRA deadline is April 15th of the tax year following the tax year in which you want to make a contribution.

So essentially, for any given tax year, you have a 15 ½ month window to max out your Roth IRA. If you fail to meet the Roth IRA contribution deadline, the window for that tax year closes forever.

Need an example?

Let's say you're eligible to make a maximum annual Roth IRA contribution of $5,000. In the actual year 2014, you make $4,000 in contributions for the 2014 tax year. Under the rules, you can still contribute an additional $1,000 before reaching your maximum contribution limit...

So can you contribute that extra $1,000 for the 2014 tax year on February 20th, 2015?

Yes.

In fact, you have until April 15th, 2015 to make any Roth IRA contributions for the 2014 tax year.

So all you have to remember is...

The Roth IRA deadline is April 15th of the calendar year following the tax year of your contribution.

Conclusion

You can make a Roth IRA contribution anytime between January 2nd of the tax year in which you wish to make your contribution and April 15th of the calendar year following the tax year in which you wish to contribute.

As a result, the effective Roth IRA contribution deadline is April 15th of the following year.

Essentially, this means you have until April 15th of any calendar year to make a Roth IRA contribution for the previous calendar year.