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Maximizing Your Last-Minute Tax Deduction: Three Strategies for Investing Your Annual IRA Contribution

How to Invest Your Annual IRA Contribution: 3 Strategies for Your Last-Minute Tax Deduction

If you’re one of the millions who made an IRA contribution before the tax filing deadline, there’s an important step you need to take to make that money grow: investing it. Leaving your funds sitting in cash can result in significant losses to inflation over time. But what’s the best investment strategy for your IRA contribution? Here are three options to consider:

1. Jump into the stock market: If you’re an early saver and not risk-averse, investing in a broad-based S&P index fund could be the simplest and most effective option. You can do some basic research to find the best fund for you, or invest in a target-date fund or a managed fund for more guidance.

2. Opt for ultrashort Treasury ETFs: If you can’t stomach the thought of losing money upfront, ultrashort Treasury ETFs can get you into the stock market with a pretty good return for now. These exchange-traded funds contain a basket of Treasurys and have low expense ratios, making them a good choice for people who want an investment in the market but aren’t willing to take on too much risk.

3. Stick to government-backed instruments: If you’re entirely risk-averse, a good option could be buying Treasurys in your IRA account, brokered CDs or high-yield money-market funds. These instruments can provide you with a yield that beats the market, but you probably don’t want to stay in this mode forever.

Ultimately, the best strategy for your IRA contribution depends on your investing personality and willingness to take on risk. But rather than let your funds sit in cash, investing them can lead to significant growth and increased benefits for your retirement.

Related Facts:

– Leaving your IRA contributions in cash can result in significant losses to inflation over time.
– The contribution limit for both traditional and Roth IRAs in 2022 is $6,000, or $7,000 if you’re 50 or older.
– The stock market has an average return of 6%, but there’s no guarantee of this return, and you should be willing to take some risk to earn potentially higher growth.

Key Takeaway:

Investing your annual IRA contribution is crucial to ensuring you get the most growth out of your retirement savings. There are various strategies you can use depending on your risk tolerance, from the simplicity of a broad-based S&P index fund to the stability of government-backed instruments like brokered CDs or high-yield money-market funds. It’s important to remember that leaving your funds in cash will result in significant losses to inflation over time and reduce your retirement benefits.


Investing your IRA contributions can seem daunting if you are unsure of your investing personality or don’t have relevant experience. But there is no reason to avoid this step, and there are several options available to you that can take the stress out of investing. The most important thing to remember is that investing your funds is key to seeing the most growth and benefits for your retirement savings.

Denk Liu
Denk Liu
Denk Liu is an honest person who always tells it like it is. He's also very objective, seeing the situation for what it is and not getting wrapped up in emotion. He's a regular guy - witty and smart but not pretentious. He loves playing video games and watching action movies in his free time.


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