Updated for the 2023 tax year.

When it comes to building your dream retirement, not all investment accounts are created equal. Some, like Individual Retirement Accounts (IRAs), come with pretty sweet tax benefits. And with those sweet benefits come rules from the IRS.

For tax year 2022, you can contribute up to $6,000 ($7,000 if you’re over 50 years old) across any Roth or traditional IRAs you own. But the deadline isn’t until April 18, 2023 (April 13 for Ellevest clients), so you still have time to max out your contributions for 2022 if you haven’t yet. For 2023, the contribution limit is $6,500 ($7,500 for the over-50 crowd). You’ll have until April 15, 2024 for that one.

So with that list of dates and dollar amounts in hand — plus the age-old question, is now even a good time to invest? (TL;DR: yes) — you may be wondering when would be the best time to contribute to your IRA.

Option 1: Not yet

There are three main reasons why you might want to hold off contributing to an IRA just yet.

First, if you have high-interest rate debt. That interest can really hurt your bottom line, so make a plan to pay it off ASAP before you start investing. Second, if you don’t have an emergency fund in place. You need a safety net for right now before you start building up for later on.

And finally, if you have access to a 401(k) that hasn’t been maxed out yet — especially if you haven’t taken full advantage of your employer contribution match. The tax benefits of a 401(k) are particularly awesome, so unless your account comes with very high fees, we typically recommend maxing out your 401(k) before turning to an IRA.

You can contribute up to $20,500 ($27,000 if you’re over 50) into a 401(k) for the 2022 tax year, and up to $22,500 (or $30,000 for the over-50 crowd) for the 2023 tax year. (But check for any special rules in your employer’s plan, and make sure it lets you contribute directly, and not just through payroll deductions, which could prevent you from using 2023 dollars to contribute for tax year 2022.)

Option 2: ASAP

When it comes to investing, time is your friend. That’s why it’s almost always in your best interest to just invest ASAP. The markets have historically trended upward over the long term, plus you’ll have more time to ride out any potential market downturns that your investments happen to encounter. And don’t forget about the power of compound returns.

So if you have enough money right now to max out your IRA — or even just a good chunk of change you could put in — put in that big contribution as soon as you can. The research supports investing the whole amount at once, up front, to take max advantage of all the time you have.

Option 3: Throughout the year

Alas, not everyone can afford to max out an IRA in one fell swoop. A more accessible option is probably to contribute consistently, a bit out of every paycheck.

If that means you can contribute $6,500 / 12 = $542(ish) a month to max it out, that’s great, but any amount invested at regular intervals will do. We recommend automating your contributions.

Not only does consistent, automated investing help you turn it into a long-term habit, but it also means you’re following a technique called “dollar-cost averaging” — by investing the same dollar amount every time, you end up with more shares of stock when the market’s down and fewer shares of stock when the market’s up, and it all averages out. That takes the whole “trying to time the market” thing out of the picture (which is good because it doesn’t work).

Option 4: Any amount, any time before the deadline

At the end of the day, when you invest isn’t nearly as important as just doing it. Plus, you’ll be kick-starting that investing habit, which is step one. Future You will thank you for it.

Disclosures