Think You Can’t Afford to Save for Retirement? Think Again.
January 14, 2009
Time and money. When we have one, we rarely have the other. For most people, retirement comes when they have the most time, but the least amount of money. Retirement should be a time to relax and enjoy what you like most, but we also know that living on a fixed income requires careful planning and budgeting. A little pre-planning before you reach retirement age will go a long way in making sure you can enjoy the most retirement has to offer.
With more and more Baby Boomers reaching retirement age, Congress is beginning to pay special attention to IRAs. A few years ago, Congress approved increased contribution limits and raised the income threshold for deductibility of contributions. IRAs are a good, secure way for most Americans to build a nest egg for their “golden years.”
The real beauty of IRAs isn’t necessarily the tax-deductibility of your contributions (and remember to check with your tax advisor regarding deductibility). IRAs are still a wise choice even if you can’t take the deduction on your tax return. Why? Because you have the advantage of compounding over time. The sooner you open your IRA, the longer the funds have to accumulate interest. That’s the true value of an IRA.
It’s in your best interest to speak to a tax advisor before opening a new IRA to find out which one is best for you – Traditional or Roth.
Keep in mind that tax laws limit your 2008 and 2009 IRA contributions to $5,000 per year, or $6,000 if you’re age 50 or older, so starting later than 25 years of age means you’ll more than likely have to supplement your IRA with another savings account that may not provide you with the tax benefits of an IRA. And remember, you have until April 15th, 2009 to make a contribution for the 2008 tax year.
Leaving your company? Have a 401K? You can roll that 401K into an IRA with no tax consequences, as long as you do a direct transfer.
The moral of the story is the earlier you start planning for retirement and making it a regular part of your budget, the greater the chance that you’ll remain faithful to your plan. It’s never too early to start setting money aside, even if it’s a little at a time.
When looking for a home for your IRA, make sure you get all the account details. Will you be charged an annual trustee fee? Will you be charged if you decide to move your IRA to another broker or financial institution? Some of these fees can add up, so make sure you know the facts before you make the plunge.
Don’t want to put your money into the risky market? Matadors Community Credit Union offers a wide selection of IRA options at competitive rates. Choose from an IRA Savings Account with a low $100 minimum to open, or if you want to earn more interest, you can choose from a 12- to 60- month Share Certificate, with a $1,000 minimum to open. And both have no annual fees! You can even rollover your 401(k), 403(b), or 457(b) into an IRA at MCCU. For information or to start your IRA, contact MCCU today!
Questions or Comments? E-mail me at blogger@matadorsmoneymatters.com.
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