You Still Have Time to Max Out Your 2019 Roth IRA Contribution

fund 2019 Roth IRA
Getty Images

When the IRS extended this year’s tax filing deadline to July 15, they didn’t just give you more time to submit your return. They also gave you more time to give your Roth IRA a boost.

In ordinary times, you would have had until April 15, 2020 to fund your Roth IRA for 2019. But when the IRS moved Tax Day to July 15, it also gave us an extra 90 days to make our Roth IRA contributions.

Here’s what’s really sweet: You can take full advantage of this extension even if you’ve already filed your 2019 return.

Why You Should Make 2019 Roth IRA Contributions in 2020

The extension applies to both Roth IRA and traditional IRA contributions, but we’re focusing on Roth IRAs for a few reasons we’ll discuss shortly.

Both Roth IRAs and traditional IRAs offer some amazing tax benefits: With a Roth IRA, you contribute after-tax money and it grows tax-free. With a traditional IRA, you can deduct your contributions, but you’ll pay ordinary income taxes when you withdraw money.

Because of the tax breaks, there are limits on how much you can put in. The 2019 IRA contribution limit is $6,000 if you’re under 50 and $7,000 if you’re 50 or older. Those limits are the same in 2020.

Because of the annual limits, it makes sense to contribute for 2019 while you can and then try to max out your 2020 contributions — which you’ll be able to do until April 15, 2021.

If you’ve already filed your taxes, making 2019 contributions to a Roth IRA will be a lot easier compared to a traditional IRA. 

Since you can’t deduct your Roth IRA contributions, you don’t even have to report them on your tax return. So it really doesn’t matter whether you’ve filed for 2019.

For a traditional IRA, most people can deduct the contribution, so it gets complicated if you’ve already submitted your return. 

You can still fund a traditional IRA in this scenario, but you’ll have to file an amended tax return. You can only do that by mail. And then the IRS will add it to its growing backlog of more than 5 million unopened tax returns that it has yet to process because most staff has been working remotely since March. That means you’ll be waiting on any refund you get because of your contribution.

For most people, a Roth IRA makes more sense than a traditional IRA. Not only does it provide you with tax-free retirement income, but the Roth IRA rules give you the flexibility to withdraw your contributions penalty-free whenever you want.

If you don’t have a Roth IRA, you can still open one and max out your 2019 contribution as long as you do so before July 15.

Pro Tip

If you’ve already gotten your tax refund, consider using it to fund your 2019 Roth IRA if you haven’t maxed out your contribution.

How to Make 2019 Roth IRA Contributions

This part’s easy: You probably manage your account online, and your brokerage firm will probably have an option for choosing 2019 or 2020 for your contributions. Otherwise, contact the firm to find out how you can specify that your contributions are for 2019.

If you fund your Roth IRA via check, make sure you write on the memo that your contribution is for 2019.

Should I Fund My 2019 Roth IRA?

The question here isn’t whether to fund your Roth IRA for 2019 vs. 2020. If you’re making Roth IRA contributions and you haven’t reached your 2019 limit, you’ll want to opt for 2019 instead of 2020. That’s an opportunity to save that will disappear forever on July 15.

The real question is whether you can afford to fund your Roth IRA right now.

We’d urge you to prioritize your retirement if at all possible. But if you’ve lost significant income or are worried you’ll lose your job soon, planning for your day-to-day survival takes precedence.

Regardless of your situation, we recommend having an emergency fund with at least three months’ worth of expenses. You don’t want to have that money invested. Sure, the market is surging as of this writing on June 8, but we don’t know where this pandemic will take us in the next few months.

The tax extension is a great opportunity to save extra for retirement — but you can only afford to take advantage if you’re prepared for an emergency. 

Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to [email protected]