Waiting Until April to Contribute to Your IRA Can Cost You Thousands

We have until April 15 to contribute to an IRA and take a tax deduction, so that's what many of us do. But this procrastination can make a serious dent in our retirement savings.

The example above is from Vanguard, which compared the earnings (in today's dollars) of two hypothetical investors, each contributing $5,500 once a year for 30 years and earning 4% annually after inflation. The "early bird" investor contributes on January 1st of the tax year, while the "last minute" investor contributes on April 1st the following year. (So, for example, January 1, 2014 versus April 1, 2015—both eligible for a tax deduction.)

The result: a "procrastination penalty" of $15,500.

This is just more evidence of the importance of saving as early as possible. Often we don't have all the money available to contribute in one lump sum at the beginning of the year, but in that case, just use the lazy approach of setting up automatic monthly contributions to your retirement fund.

Delaying IRA contributions until April can cost you | Vanguard

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