If you have an individual retirement plan such as an IRA, you are going to need to make sure that you make the most of it by the time you are ready to retire in order to ensure that you can stop working and still live comfortably. Here are some tips for making the most out of your IRA and saving as much money as possible.
1. Put Funds Directly Into Your IRA From Your Paycheck
Your IRA is not tax-deductible, but any funds that you do put into your IRA are not taxed when they enter the IRA. This means that you can get more out of your paycheck each week by putting a sum of the check straight into your IRA. If you hit your income limit and can no longer put money into your IRA without it not being taxed, still put money into your IRA and utilize the tax-deferral feature that will allow you to pay the taxes at a later time.
2. Make the Bulk of Your Contributions to Your IRA As Early in the Year As Possible
IRAs have compounding interest, meaning that the interest that the account has already gained that year is included in the amount that is used to calculate the later interest amount. Try to save up your money throughout the year so that you can make a maximum contribution to your IRA on the first day of the year. This will allow you to have the maximum amount of money in your IRA that will continue to compound over the course of the year. Instead of making regular payments into your IRA, simply open a separate savings account and put them there so that you can make the maximum contribution the next year immediately.
3. Don't Worry About Making the First of the Year Deadline
Finally, if you are unable to make the maximum contribution to your IRA by the end of the year, you can still make that contribution by the time you file taxes the following year. For example, a person who was unable to make the maximum contribution in 2013 had until April 15, 2014 to make the maximum contribution to his or her IRA for the year 2013. If you take advantage of this extra time, you can ensure that you are putting as much into your IRA as possible and are not missing out on any savings opportunities.
For more information, talk to a company that specializes in IRA rollover advice and other IRA planning information.
Share13 October 2015
I still remember the day that my wife and I bought our first home. We were excited about filling the place with new furniture and looking for great area rugs. Unfortunately, before we knew it, we found ourselves deeply in debt. It was difficult to dig our way out, but over the course of the next several years, we were able to make things right. I want to teach other people how to manage finances so that they can avoid the turmoil that we went through. Financial planning might seem impossible, but with a little practice, I know it can become second-nature.