You have until April 15 to save in a Roth IRA. Here’s why you should

You may have more time to pay your taxes, but you’re running out of time fund your IRA for 2019.

The Treasury Department threw accountants and tax preparers for a loop this week when it announced it would give taxpayers until July 15 to pay taxes owed.  Returns would still be due on April 15, however.

Similarly, the clock is ticking for  filers who still want to make 2019 contributions to a traditional or Roth individual retirement account, or to a health savings account, which is a tax-advantaged account that’s coupled with a high-deductible health plan.

“Those deadlines are tied to the due dates of the return, and since the due date is still April 15, those deadlines are still April 15,” said Mark Jaeger, director of tax development at TaxAct.

Now might be a terrifying time for people to throw money back into the market. Major stock market indexes have become volatile in recent weeks as the number of coronavirus cases continues to rise.

But there’s a silver lining. “Stocks are very cheap now,” said Jaeger.

People who hold an HSA can make contributions for 2019 up until April 15. In this case, pretax or tax-deductible dollars grow free of taxes over time. You can tap the money for qualified medical expenses tax-free.

For 2019, if you have self-only high-deductible health plan coverage, you can contribute up to $3,500. If you have family high-deductible health plan coverage, you can contribute up to $7,000.

In addition,  you can contribute a total of $6,000 ($7,000 if you’re age 50 and up) to your traditional or Roth IRAs for 2019.

“The IRA contribution deadline is a hard stop on April 15 – always has been and always will be,” said Margaret Dunn, an enrolled agent and tax preparer in Monterey, California. “If I file an extension and have until Oct. 15 to file a return, it doesn’t extend time to contribute.”

The only exception would be for Simplified Employee Pension IRAs, or SEP IRAs, which employers must fund by April 15 – or by Oct. 15 if they go on extension.

Contributions to traditional IRAs may be tax-deductible, depending on your adjusted gross income. Savings grow on a tax-deferred basis, and when you pull money out in retirement, you pay income taxes.

Meanwhile, Roth IRAs allow you to stash after-tax dollars and have them grow free of taxes. At retirement, you can take tax-free withdrawals.

Roth IRAs are especially attractive now for two reasons.

First, you’re saving after-tax dollars at a time when individual income tax rates are at a low.

Further, you can pull back the contribution you’ve made to the Roth IRA if you need cash – and do so free of taxes and penalties.

Just be aware that Roth IRA earnings must meet two conditions in order to be tax-free at withdrawal.

First, five years must have passed since you contributed to the Roth IRA account. Second, you must be at least 59½ years old.

“People are starting to be laid off, and it’s difficult to find that money when you start being put out of work,” said Jaeger. “But you can always get your basis back from the Roth IRA.”

More from Smart Tax Planning:
Where to get your tax return done for free
Treasury recommends Trump delay the April 15 tax deadline
Why your tax return may spark interest from the IRS