Funding an IRA (Roth & SEP) at last-minute before tax deadline

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
EmergencyMD84
Posts: 2
Joined: Fri Apr 13, 2018 10:53 pm

Funding an IRA (Roth & SEP) at last-minute before tax deadline

Post by EmergencyMD84 » Fri Apr 13, 2018 11:28 pm

Hi folks,

I'm new to the forum but not new to procrastination, leading to the following dilemmas:

I'd like advice/experience re: last-minute funding of a SEP-IRA and Roth IRA. In your experience, which company (Vanguard, Schwab, Fidelity, or someone else) most expeditiously approves new accounts and offers a seamless way to fund before 4/17? (As I understand it, filing an extension on my taxes would extend this for the SEP, but I'd prefer to get it done by 4/17 if possible...)

1. SEP IRA: I currently have a Roth IRA with Vanguard but would prefer to open the SEP with either Schwab or Fidelity. I started the process three days ago at Schwab but the account is yet to be approved due to an error I made on the 7-page application form, and nobody is available this weekend in the department that allows me to correct it. This should hopefully be resolved on Monday, and as I understand it the fastest way to get $ into the account is depositing a check in a branch, meaning I could contribute for 2017 by Tuesday. Anyone have experience with Schwab and whether this is a feasible plan?

If not, what is the new account process like at Fidelity? (The initial application is very straightforward at Vanguard, but they seem to move slowly to approve and fund based on prior experience with my Roth, so I'm hesitant to use them for this account).

2. Roth IRA. As above, I have an account at Vanguard and have waited until now to make the last part of my 2017 contribution. Unfortunately in the interim I also closed the checking account I'd previously linked for transfers. I entered my new checking info and initiated an order, which is listed as "in process." There is a verification process for the new checking account that takes a few days and definitely must be done for transfers out of Vanguard into my bank, but I'm unclear if it needs to be done before they will transfer money from my bank into the Roth account?

How does the 4/17 deadline for 2017 Roth contributions work in this situation? Is it enough that I've placed a buy order that is in process, or does the order need to be executed and the $ sitting in my account?

Appreciate any insights or anecdotes - Thank you!

Rainmaker41
Posts: 438
Joined: Tue Apr 26, 2016 11:34 am

Re: Funding an IRA (Roth & SEP) at last-minute before tax deadline

Post by Rainmaker41 » Sat Apr 14, 2018 6:12 am

Open and fund the Roth IRA anywhere. You can move the funds later. If you add funds to your Vanguard IRA, won’t it show as 2017 if you select that at the time the transaction is initiated, even if the transfer takes some time?
My username is not about money, but is my old online gaming username. I can't say that I make a great deal of money; I just hate spending it. Married the most loving woman in the world October 2017.

Spirit Rider
Posts: 7565
Joined: Fri Mar 02, 2007 2:39 pm

Re: Funding an IRA (Roth & SEP) at last-minute before tax deadline

Post by Spirit Rider » Sat Apr 14, 2018 8:47 am

For the SEP IRA, file an extension for your tax return. This extends the SEP IRA contribution deadline to 10/15/18 even if you file your taxes on time.

As you noted the extension does not change the IRA contribution deadline. Usually, an initiated IRA contribution will be counted on the date initiated. However, if the transaction fails and you are unable to make a contribution by the deadline you are out of luck.
Last edited by Spirit Rider on Sat Apr 14, 2018 8:53 am, edited 1 time in total.

retiredjg
Posts: 32137
Joined: Thu Jan 10, 2008 12:56 pm

Re: Funding an IRA (Roth & SEP) at last-minute before tax deadline

Post by retiredjg » Sat Apr 14, 2018 8:53 am

Welcome to the forum. :happy

With your username, I would wonder if you are even eligible to contribute to Roth IRA. Have you checked?

krow36
Posts: 1690
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: Funding an IRA (Roth & SEP) at last-minute before tax deadline

Post by krow36 » Sat Apr 14, 2018 3:44 pm

EmergencyMD84 wrote:
Fri Apr 13, 2018 11:28 pm
2. Roth IRA. As above, I have an account at Vanguard and have waited until now to make the last part of my 2017 contribution. Unfortunately in the interim I also closed the checking account I'd previously linked for transfers. I entered my new checking info and initiated an order, which is listed as "in process." There is a verification process for the new checking account that takes a few days and definitely must be done for transfers out of Vanguard into my bank, but I'm unclear if it needs to be done before they will transfer money from my bank into the Roth account?

How does the 4/17 deadline for 2017 Roth contributions work in this situation? Is it enough that I've placed a buy order that is in process, or does the order need to be executed and the $ sitting in my account?
I'm helping a friend with a similar problem. She wants to contribute to her 2017 Roth IRA and called Vanguard yesterday. They had her start the process of linking her bank to her Vanguard Roth. Vanguard says they will send the 2 small test deposits to her bank account, and that it can take 2 or 3 business days. After she confirms the amounts to Vanguard, the link will be activated. Since it looks like the link may not be functioning by Tuesday, today she tried to do an exchange from her taxable Individual account. When she proceeded to the Roth IRA account step, it said that she had already contributed to it for 2017! Even though she hadn't funded it.

This would seem to confirm Spirit Rider's idea that "Usually, an initiated IRA contribution will be counted on the date initiated." I think she will call Vanguard Monday for confirmation.

Student2
Posts: 14
Joined: Fri Jul 13, 2012 8:26 pm

Re: Funding an IRA (Roth & SEP) at last-minute before tax deadline

Post by Student2 » Sun Apr 15, 2018 2:38 pm

As mentioned above, just put it anywhere and transfer the funds afterward. And by anywhere, I’d start by considering IRA accounts at the bank where you have the money currently. You can move it into a bank account in an IRA and, hopefully, your bank will be able to set up the account in less time. Then later, when you have time, invest the funds according to your investment policy statement and desired asset allocation .

To be Boglehead about it, when you move the funds, set up a monthly contribution for 2018 at the same time. If you’re not sure you’ll be able to fully fund the IRA, then set up an amount that you’re comfortable with. This time next year, even if you need to add funds, you’ll still be ahead. Several members on this forum fully fund their IRAs in the first few days of each year. Regardless, monthly automatic contributions will get your money invested sooner and that’s always better in the long run.

EmergencyMD84
Posts: 2
Joined: Fri Apr 13, 2018 10:53 pm

Re: Funding an IRA (Roth & SEP) at last-minute before tax deadline

Post by EmergencyMD84 » Mon Apr 16, 2018 1:35 pm

To close the loop:

I'm a resident with enough moonlighting/side business income to make a SEP contribution worthwhile, but (un?)fortunately not enough to prevent direct contributions to a Roth.

1. While I found the Schwab account opening process more convoluted than I'm used to with other institutions, I was very impressed with their phone and online support over the weekend. They were able to point out the issue with my initial documents and get a revised set reviewed and approved this AM. I was able to fund the SEP account with a personal check in a Schwab office an hour later (funds immediately available for investment).

2. As you all predicted, Vanguard processed the Roth IRA contribution before I completed the link to my new checking account. I initiated the process at 23:00pm on 4/12 and by 00:30am on 4/14 the new funds were included in my Roth IRA balance as a 2017 contribution. My bank didn't indicate the withdrawal until this morning. Subsequently, the verification/test deposits posted and I was able to fully link my checking accounts.

Appreciate all the thoughts and advice - it's clear I was making this harder on myself than it needed to be. Hope I can pay this advice forward in the future!

Post Reply