Maximizing Contributions and Meeting Deadlines
Be Sure To Maximize Your Annual Contributions!
You may have access to an employee savings program such as a 401(K), and you definitely have access to a Traditional or Roth IRA. What you may not have known is that you are not limited to using one or the other of these options. Instead, you can invest in both types of retirement accounts at the same time. If you have access to multiple retirement savings programs, it is in your best interest to fund them all, and as fully as you can afford.
Employee savings programs are easy to participate in. You simply tell your human resources department representative how large a percentage of your income you want to invest in such accounts, and thereafter, that amount will be automatically diverted into your own retirement account.
Setting up IRAs (Traditional or Roth) is another story. No one will do this for you. You have to take the initiative to set up these accounts with a bank or investment firm, and then manually sent money to your accounts each year. There are deadlines for making annual contributions that you must pay attention to or risk not being able to shelter money for the year you missed.
Don't Miss Contribution Deadlines!
At the end of the each year you will want to make sure that you have made the maximum contributions allowed for every investment vehicle you participate in. Some investment vehicles have different deadline rules as to when you can invest; until tax day (April 15th each year) for example. Below are some contribution deadlines for the investment vehicles discussed on this site.
- Traditional IRA. The deadline for making contributions to Traditional IRAs is the same as the deadline for filing tax returns each year. (For most people this would be April 15th.)
- Roth IRAs must be designated as such when opened, and must be established by the filing due date of your income tax return (April 15 for most filers).
- SEP Plan. The deadline for a business to open a SEP and make a legal contribution is the business's tax-filing deadline (including extensions).
- 457 Deferred Compensation Plan. The deadline for making 457 contributions is the is the same as the deadline for filing tax returns for that year (Typically April 15th).
You should always consult a qualified tax professional to inquire about the deductibility of contributions to your various accounts and how participation in a particular investment vehicle affects your overall tax status.