The Best Time to Invest Your IRA (It’s Not April)

Over the past 150 years, the U.S. stock market (including dividends) has ended the year positively roughly 75% of the years, according to many studies, including one by ​Visual Capitalist​.

So if you max out your IRA during the first week of January in the tax year of the contribution, there’s a 3-in-4 chance your invested dollars will end the year higher.

Yet many people wait until they file their taxes the following year to contribute at the last minute (e.g., the 2026 IRA contribution deadline is April 15th, 2027).

During tax time, it’s one of the top tips from professionals: “Don’t forget to make your prior year IRA contribution before the tax filing deadline”.

If you wait that long, that’s 15 1/2 months that your annual contributions could be working for you (e.g., $8,600 compounding at 9% annualize rate of return).

Multiply that effect over the next few decades, and the difference could be tens or maybe hundreds of thousands of dollars.

Here’s an IRA contribution timing hierarchy, ranked best to worst:

• Best: Invest the ‘lump sum’ maximum contribution for the current year in early January.
• Second Best: ‘Front-load’ IRA contributions by maxing out as soon as practical (when you have the cash).
• Third Best (still pretty good): Dollar-cost average IRA contributions throughout the year.
• Bad: Wait for the market to drop, then try to time your contribution perfectly (you won’t succeed)
• Worst: “Don’t forget to make your prior year IRA contribution before the tax filing deadline”.
• Absolute Worst: Don’t invest.

A lot of us fall into the bad-to-the-absolute-worst area. Yet, these are behavioral mistakes we can avoid.

Given our 150-year history of positive annual performance, it is best to invest the max as early as possible.

When that’s not possible because we don’t have the cash, the next best option is to front-load contributions as soon as the cash is available, continuing until the maximum is reached.

It’s more common to dollar-cost average into the IRA, which is still a very good option, similar to how an employer 401(k) plan works.

When you dollar-cost average (DCA), remove your emotion and bias from the equation by automating contributions and investments through your broker.

This is the topic of this week’s video — how to automate contributions and investments at Fidelity. But all brokers provide similar automations.

Though the dollar-cost averaging method is inferior to the lump-sum approach, it’s often the best option if you don’t have the cash available to max out the IRA in January.

The “Bad” option is where many of us find ourselves some years (been there).

It’s not terrible if you’re investing in the current tax year (better than the following April). But each day you wait, the odds that the stock market will rise increase.

And timing the market is for traders and hedge funds, not long-term DIY investors.

Yes, you can get lucky and hit the bottom — maybe you invested your IRA in early April 2025 during the tariff announcement event.

But over time, your luck will run out.

Going against a proven best system (max out early, front load, or DCA) is a choice that leads to suboptimal performance and a smaller nest egg.

The goal isn’t perfection — it’s simply moving up the hierarchy.

If you’re a last-minute contributor in April, shift to DCA. If you’re a DCA investor, challenge yourself to front-load next January.

Every rung up the ladder is money working harder for you, longer.