By Cindy Cabbage
Do you have an IRA? If so, have you made your 2016 contribution yet? Even though we’ve turned the page on the calendar, you still have a little time to make an IRA contribution attributable to 2016. Maybe you already knew that. But maybe you aren’t convinced that building your IRA is a worthwhile goal. If that’s what you think, take a few minutes to read about these reasons to reconsider.
1. A little bit each year adds up over a lifetime.
Often some younger people hesitate to start an individual retirement account (IRA) due to its name. Retirement can seem so far off to those in their 20’s or 30’s. Yet that is exactly the right time to open and pay into an IRA. For several reasons, if you wait until you’re really thinking about retirement to start contributing, it will likely be too late. Since IRA contributions are limited, you can’t just pour in a bunch of money in the last few years preceding retirement. Even if you could, where would you get a bunch of money? A much better strategy is to make contributions to your IRA starting while you are young so that those contributions can add up in a significant way.
2. Money grows over time (especially when it grows tax free).
There is no doubt that contributions can add up over time. For example, 30 years of contributions of $3,000 each adds up to $90,000 put away towards retirement. Yet there is also the added benefit of interest growth. Money can grow in amazing ways through compounding interest. In IRAs, this benefit is enhanced because interest earnings on your IRA are not taxed.
3. It should be a part of your overall retirement plan.
Perhaps you don’t consider an IRA to be necessary because you already have a pension in place or maybe you just plan to live on your social security benefits. Yet the reality is that it is not wise to place all your eggs in one basket. Relying on one source of income for retirement can be a perilous position. It is better to have a balanced strategy of financial planning for retirement. An IRA can be a solid, secure part of that strategy.
4. It may mitigate your tax liability today.
Many of the benefits of an IRA aren’t realized until far into the future. However, there is one bonus benefit that you can enjoy today. Traditional IRA’s allow you to deduct the amount of contribution from your taxes. This can make a difference in the amount of your tax liability or tax return. Be sure to talk with your tax preparer for counsel specific to your particular situation.
5. It helps ensure your comfortable retirement tomorrow.
Finally, the most important reason that you should consider contributing to an IRA is that it can help you be sure that when you do retire, you have the money you need. Again, this seems to be in the distant future. Yet any retiree can tell you that those busy working years go by fast. Planning today can pay off with big dividends in the future.
Are you convinced that an IRA could be a valuable tool? If you need help setting up an account or just making a contribution, we can help you with that. Visit us at any of our branches and we will take care of it for you. But don’t delay because April 18, 2017 is the deadline for making a contribution for the 2016 tax year.
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