The benefits of contributing early to your IRA

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An IRA is a valuable investment tool, but too many investors are missing out on 15 months of potential tax-deferred growth by waiting until tax time to contribute. Funding an IRA earlier can help you get that much closer to your retirement goals.

What’s an IRA?

An individual retirement account (IRA) is a tax-advantaged retirement vehicle that can help you save for retirement. The two most common types of IRAs are traditional IRAs and Roth IRAs.

The key difference lies in how and when you pay taxes. A traditional IRA helps you reduce your current-year tax burden in the form of a tax deduction for current-year contributions (if eligible) and defer taxes until you take distributions in retirement, while a Roth IRA helps you reduce your future tax burden by contributing after-tax dollars now for tax-free withdrawals in retirement.

This table outlines some of the main differences between a traditional IRA and Roth IRA.

	Traditional IRA	Roth IRA
Taxes	You make contributions on a pretax basis (if your income is below a certain threshold) and pay no taxes until you withdraw money.	Your contributions are not tax-deductible, but any earnings growth is tax-free, and qualified withdrawals¹ are tax- and penalty-free.
Contribution limits for the 2025 tax year	If you’re 49 or younger: Up to $7,000 If you’re 50 or older: Up to $8,000	If you’re 49 or younger: Up to $7,000 If you’re 50 or older: Up to $8,000
Eligibility	You must have taxable compensation to be eligible to contribute.	You must have taxable compensation AND your income must be below a certain threshold to be eligible to contribute.
Contribution deadline	You can make contributions throughout the year, up to the tax-filing deadline, not including extensions (generally April 15).

¹ ^{A qualified withdrawal occurs when the five-year holding period is satisfied and the distribution is the result of the account holder being 59½ or older, death, disability or a first-time home purchase (up to $10,000 lifetime maximum).}

Why fund an IRA early?

While you can contribute to an IRA any time between Jan. 1 and the tax-filing deadline, waiting until the last minute could cause you to miss out on 15 months of tax-deferred, compounded growth. Although 15 months may not seem like a significant amount of time, it could impact your retirement savings considerably.

The table below illustrates the difference 15 months can make.

When it comes to saving for retirement, time is one of the most powerful tools available to you. Not only is it potentially beneficial to contribute to your IRA earlier in the year, but contributing to an IRA earlier in life can give your investments more time to compound, which can significantly increase your portfolio over time.

How Edward Jones can help

Work with an Edward Jones financial advisor to help you identify your personal retirement strategy and when and how much to contribute to your IRA.