This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

These Are Your Last-Minute, Tax Day IRA Options

NEW YORK (TheStreet) -- It happens to the best of us: April 15 creeps up for months and sprints to the finish, leaving so little time for last-minute moves such as funding an IRA. Happily, this doesn't have to be the headache it seems.

The looming deadline does matter, as today is the last day to contribute for 2013. If you are eligible to deduct your contribution, it can produce a nice tax saving right away. And even if you'll get no deduction, your 2013 contribution can enjoy tax-deferred growth for decades. Whether you can deduct your full contribution, a maximum of $5,500, or $6,500 if you are 50 or older, depends on your income and whether you or your spouse have a retirement plan at work. Here's a calculator for this.

Brokerages, banks and mutual fund companies make IRA enrollment easy with online signup. With little time to weigh options, you can open an account, put your contribution into a money market for the time being, then move it to a more suitable investment after doing some research.

But don't wait too long. Vanguard Group, the mutual fund giant, found that last-minute contributions that went into cash such as money-market funds tended to stay there for months. That could have been costly in 2013, because the stock market soared early, then kept on going.

Must Read: Where Taxpayers Get Tripped Up on Obamacare

Investors who don't want to do a lot of investment research, or feel unequipped for it, have a couple of easy options.

One is to pick an index fund representing the broad market. Indexers have very low fees, which is quite valuable for a long-term holding such as an IRA. And they tend to do better over time than actively managed funds that hunt for hot prospects. Because indexers' investment strategy is automatic, simply buying and holding the stocks or bonds in a market index such as the Standard & Poor's 500, you don't have to worry about something happening to your investment manager.

Another easy option is the target-date fund, with a date matching your expected retirement. These divide the investor's money between stocks and bonds, readjusting to a safer, bond-oriented mix as the retirement date approaches. Once your money's invested, you really don't need to do anything more. Target-date funds typically use a mix of index funds.

People with ordinary taxable investments as well as tax-favored holdings such as IRAs and 401(k)s are wise to think about which type of holding should go into which account.

Some types of investments make relatively large cash payments every year through interest earnings, dividends or capital gains distributions. Even if that cash is reinvested automatically, it is taxed in the year it is received if the investment is in a taxable account. So investments that churn out lots of cash can be held in an IRA, allowing the taxes on that reinvested cash to be postponed until money is withdrawn.

But for now, make that 2013 contribution today so you can get any deduction available to you and ensure those tax deferrals. Put the contribution into a money market fund if you need time to choose something better. Just be careful not to dawdle on your long-term decision.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.98 0.26%
FB $118.57 0.84%
GOOG $698.21 0.75%
TSLA $238.50 -0.94%
YHOO $36.53 -0.19%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs