Putting the max per year in your personal IRA can make a lot of difference in the long run.
Can IRA Contributions Really Add Up?
I am 30 years old and have a good job, however my employer does not offer a 401(k) plan or other type of retirement plan. I know I should start saving for retirement but am wondering if IRAs really make sense. Will $5,500 annual contributions to an IRA really grow enough to prepare me for retirement?
Once you retire, your income will come from four primary sources - Social Security, any employer retirement plan, your IRAs and your other personal savings. Of those four sources, you have control over your IRAs and your personal saving.
Someone once said that we tend to over estimate what we can do in the short-term and under estimate what we can accomplish in the long-term. This is especially true with saving for retirement with an IRA.
Currently, you can contribute up to $5,500 each year to a regular IRA. In addition, since you are not eligible to participate in an employer qualified retirement plan, your contributions to your IRA will be tax deductible. For someone in the 25% tax bracket, that equates to a tax savings of $1,375 each year.
It can be easy to put off or fail to make contributions to an IRA. Retirement may seem like a long way off and $5,500 may not sound like a lot of money to save. But look at how these contributions can accumulate.
When you take money out of your IRA, you will have to pay income tax, but the numbers are very impressive.
No one can accurately predict what level of earnings you may earn on your IRA investments and it is difficult to foresee what future tax laws may be. However, using an IRA as part of your retirement planning strategy can help you have the type of financially secure retirement you desire.
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