Life if full of mysteries and part of the joy of life is exploring them and trying to find out the answers. Some of crazy complicated, and you can never figure them out (ex. The human heart and its emotions). Some it just takes some real world experience to identify why things are.
I have always contributed to my retirement savings on a regular basis, through payroll deductions either to my 401K, or through monthly payments to my IRA. I think I have been doing since my first post-military job. Even when I was a young lieutenant making $25,657/year, we were putting away almost $1,000/month in savings (Note that this was because we were on military base housing, so rent & utilities were paid for).
I always wondered why you could contribute to your IRA all the way into April of the following year – i.e. I could be putting money into my IRA for 2018 as late as April 2019. Could even deduct it on my taxes, as if I had already done it (though you would get into a lot of trouble if you said you would to the IRS, but did not). Yet, I asked why people would wait until the following year, and miss the benefits of a year of growth, and the potential upside of dollar cost averaging. Did not make sense to me.
Well, as of this year, I finally figured out why. I stumbled on it when we did our Roth conversion last year, and I discovered that we had overdone it, and because our income was now too high, we could do our regular monthly ROTH investments. I had to pull that money back and place it in our normal IRAs. Ouch! Major paperwork issue – though it has been sorted out.
Therefore, I stopped contributing monthly to our Roth IRAs, and instead put the money into our normal, post-tax investments. Fast forward to November, and we are considering doing a smaller ($40k) Roth rollover. Why so small? Because if we do more, it may dump us over the threshold of being able to contribute. Therefore, we are going to keep it at $40K, and then, when we do our taxes in early 2020, we will see if we can contribute to our Roth for 2019.
Thus, in March of 2020, I will be contributing funds to my 2019 Roth IRA. Now I know why.
Mr. 39 Months