There's a key number to know before making a last-minute IRA contribution by April 15

As the April 15, 2025 tax filing deadline approaches, investors across the United States are making a final push to contribute to their Individual Retirement Accounts (IRAs) for the 2025 tax year. According to data from Fidelity Investments, this period consistently sees a surge in deposits, with average contributions in the two weeks leading up to March 20 up 18% compared to the prior five weeks. The rush occurs because the tax deadline serves as the final cutoff for making IRA contributions that count for the previous year, a critical step for those seeking tax advantages or bolstering their retirement savings. A significant trend highlighted by the data is the overwhelming preference for Roth IRAs, which accounted for nearly three-quarters of recent deposits. Unlike traditional IRAs that offer an upfront tax deduction, Roth contributions are made with after-tax dollars, allowing for tax-free growth and withdrawals in retirement. However, experts like Rita Assaf, Vice President of Retirement Offerings at Fidelity, caution that a key step before making any last-minute contribution is to 'know your numbers,' particularly your Modified Adjusted Gross Income (MAGI). This figure is crucial because it determines eligibility for both Roth contributions and the tax deduction for traditional IRA deposits. The central challenge for many investors is correctly calculating their MAGI, which can be a complex process. It starts with the Adjusted Gross Income (AGI) from one's tax return and then adds back certain deductions, such as those for student loan interest, while subtracting income from sources like Roth conversions. For the 2025 tax year, the ability to make a full Roth IRA contribution of $7,000 (or $8,000 for those 50 and older) phases out completely for single filers with a MAGI of $165,000 and for married couples filing jointly with a MAGI of $246,000. Similarly, the deductibility of traditional IRA contributions is phased out for individuals who are covered by a workplace retirement plan, depending on their MAGI and filing status. Financial advisors strongly recommend that investors look beyond the immediate deadline and consider their broader financial picture. Certified Financial Planner Joon Um advises against rushing a contribution simply because of the calendar. Instead, investors should weigh factors like their current and future expected tax brackets, overall retirement goals, and the benefits of having tax-diversified accounts (a mix of pre-tax and after-tax savings). The decision between a Roth and a traditional IRA is not merely about a current-year tax break but a strategic choice impacting long-term financial health and tax liability in retirement.