How to Add to an IRA Before the Tax Deadline

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Opening an individual retirement account, or IRA, before the April 15 deadline for filing income taxes has definite advantages. Not only can you earn a tax deduction for contributing to an IRA, but the earlier you open one the greater your chances of building up a nest egg by the time you retire. IRAs are an especially useful way to save if your company doesn’t provide a retirement plan or if you’re self-employed.

Decide whether you’d rather open a traditional IRA, a Roth IRA or both. While a Roth IRA allows you to withdraw your money at retirement completely tax-free, your contributions are made with after-tax dollars. This means there are no tax breaks for contributing to a Roth. A traditional IRA works in the opposite way. You receive a tax deduction on your investments, but you must pay taxes on your withdrawals in retirement.

Determine whether you are eligible to open the type of IRA you desire. To contribute to a traditional IRA you must be under 70 1/2 years old and have some form of earned income. For a Roth IRA, your income must be under $105,000 if single or $167,000 if married filing jointly.

Choose between opening an account at a bank, a brokerage company or a mutual fund company. Opening an IRA at a bank is a good option if you have little money to initially invest. Or, if you feel uncomfortable choosing which stocks in which to invest, opt for a mutual fund, where professional investors diversify your money over many different stocks. A brokerage company, where you hand-pick your investments, is a good choice if you have more experience investing.

Contact the bank, mutual fund or brokerage company of your choice and express interest in opening an IRA. Take your time in deciding how to invest your money: generally, stocks are a good choice for younger or risk-taking investors, and bonds are better for mature investors or those who don’t feel comfortable with an erratic stock market.


  • If you contribute to a traditional IRA before the tax deadline, this will reduce your tax bill for the previous tax year. For example, if you open an IRA and invest in it before April 15, 2011, when you file your 2010 taxes you may deduct your IRA contributions -- resulting in a bigger refund for 2010.