It is important that you make your complete Roth IRA contribution as early as possible. If you wait for making IRA contribution until the end of the fiscal year, you may end up losing a lot of money. On the other hand, you have nothing to lose by funding the Roth IRA at the beginning of the year as you can withdraw the money from the account at any time without any penalty.
Depositing the money in Roth IRA at the earliest has several advantages. Due to the compounding nature of returns, you will get higher returns if you deposit the money earlier. Since you get interest on interest, your money will grow more if you deposit it earlier. If you wait until the end of the year, you would not be able to earn the extra return for that whole year. One year can make a huge difference in the total return that you’ll earn on your investment. So put the money in your Roth IRA up to the maximum limit as early as possible.
However, this does not mean that you should borrow money to fund your Roth IRA. Borrowing money can be expensive and it can neutralize the benefit you get by investing earlier. Only if you can get a loan at a very low interest rate, you can consider this option. What you need to assess is whether the returns you will lose out on by investing later are more than the interest you have to pay on the borrowed money. If the returns on the IRA investment are likely to be more than the interest that you’ll pay on your loan, then it makes sense to borrow money to fund the account.
If you cannot get cheap debt, you can even take some money from your savings account to fund the IRA and deposit money in your savings account later in the year. This is not a bad idea as you can use Roth IRA money during emergencies without incurring any penalty. But unless you expect returns from your Roth IRA account to be greater than what you’ll get from your savings account, this transaction will be pointless.
If you do not have a retirement fund yet, then you should open a Roth IRA account as soon as possible. Don’t forget that the earlier you start building your retirement fund, the more comfortable your post-retirement life will be.