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Have You Maxed Out Your IRA Contributions Yet?

The importance of saving for retirement is on everybody’s mind these days.  When times were good and the market was booming, many people fell into the habit of saving too little of their income in the false belief that generous market returns would persist indefinitely.  Tsk tsk.

Why You Should Probably Save More

There are several reasons you should max out your Roth IRA (if you meet the Roth IRA qualifications), before the IRA deadline.

  1. Returns Going Forward May Be Low – From 1982 until 2008, the stock market was in the longest continuous bull market this country has ever seen.  Sure, there a few small setbacks (like the early 90′s) and a few more significant ones (like 2000-2002), but the overall trend was persistently upwards.  The Dow Jones Industrial Average gained almost 10-fold in that period.  But those days are over.  The economic tailwinds that propelled the market over the past 2 and a half decades have turned into headwinds.  Rising oil costs and loose monetary policy will make things difficult.
  2. You Can’t Afford To Take Any Chances – Many Americans were unknowingly treating the market like a money machine before.  Sure, over the long run the stock market has always rewarded investors.  But do you want to stake your retirement on it?  I don’t.  I will invest aggressively, to be sure, but I will also save enough money so that I’ll still be able to retire comfortably even if I don’t get the high returns I’m hoping for.
  3. The Tax Advantages Are Too Good To Pass Up – Much like a 401k, Traditional IRA contributions are deductible in the year you make them i.e. if you contribute $5,000 to a Traditional IRA this year, your taxable income will be reduced by $5,000.  Roth IRA contributions, on the other hand, are not deductible in the year you make them but instead your earnings are completely tax-free in retirement.  Think your retirement dollars would stretch a bit further if you didn’t have to pay tax on them?  Of course they would.

Related posts:

  1. Is a stretch IRA right for you?
  2. Learn Roth IRA Basics
  3. What are the Best IRA Rates?
  4. Understanding the Roth IRA
  5. Know the Guidelines Concerning the IRA Interest
  6. Discover the 401k IRA Rollover
  7. Roth IRA Withdrawals
  8. Begin Payments At Retirement With A Deferred Fixed Annuity
  9. Basic Investment Tips and Stock Market Information
  10. Cash for Settlement Basics

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