Tom Sullivan reminds us that in a world where 401(k)s are getting all the press, we shouldn't forget about the grand old man of retirement vehicles, the individual retirement account.
Survey after survey shows a heavy majority of people say they will not have enough to live on when they retire. Yet less than half of them say they are putting money into an IRA. Why not? The clock is ticking, and the day of reckoning is coming.
You do not have to contribute money in one lump sum, nor do you have to contribute the maximum amount allowed.
You can put in as little as you want, a tiny amount, if that is all you can afford. You just cannot exceed the annual maximum, which is now $4,000 (or $5,000 for people 50 or older). You can budget it to make a monthly contribution, if that makes it easier on your checkbook.
Don't let the rules on tax deductions sway you against contributing. Many people won't contribute because they don't qualify for a tax deduction. They may already be in another qualified retirement plan, their income is above the deduction threshold or they chose a Roth IRA.
(The Roth IRA, you may recall, is not tax deductible, but all earnings are completely tax-free.)
A tax deduction should not be the main reason you consider putting money into an IRA. You are saving money, and it grows without any current tax liability. The idea is to build a nest egg for the future.
People often ask me whether they can contribute to both an IRA and a 401(k). Yes, you can put money into both."
Tom Sullivan reminds us that in a world where 401(k)s are getting all the press, we shouldn't forget about the grand old man of retirement vehicles, the individual retirement account.
Survey after survey shows a heavy majority of people say they will not have enough to live on when they retire. Yet less than half of them say they are putting money into an IRA. Why not? The clock is ticking, and the day of reckoning is coming.
You do not have to contribute money in one lump sum, nor do you have to contribute the maximum amount allowed.
You can put in as little as you want, a tiny amount, if that is all you can afford. You just cannot exceed the annual maximum, which is now $4,000 (or $5,000 for people 50 or older). You can budget it to make a monthly contribution, if that makes it easier on your checkbook.
Don't let the rules on tax deductions sway you against contributing. Many people won't contribute because they don't qualify for a tax deduction. They may already be in another qualified retirement plan, their income is above the deduction threshold or they chose a Roth IRA.
(The Roth IRA, you may recall, is not tax deductible, but all earnings are completely tax-free.)
A tax deduction should not be the main reason you consider putting money into an IRA. You are saving money, and it grows without any current tax liability. The idea is to build a nest egg for the future.
People often ask me whether they can contribute to both an IRA and a 401(k). Yes, you can put money into both."
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