Here at IRA Innovations where retirement savings are our primary focus, we see account holders from all walks of life. What we’ve seen over the years is that many people don’t start their initial savings for retirement until their early 30’s to early 40’s.
The consequences of not establishing a tax-favored retirement account at a young age are significant. Investing 10 years earlier than the current standard age for retirement can be the best investment opportunity in many people’s financial lives.
For example, compare two people, one who starting saving in their mid-20’s, the other in their mid-30’s. Tax-deferred IRA accounts only allow a set amount of money to be transferred into the account per year. When the younger individual has a decade or more of additional opportunity to add to their retirement account, their savings will generally be at least double that of someone who starts in their mid-30’s.
For a traditional or ROTH IRA, the highest contribution amount allowed per year is $5,500, or $6,500 if older than 50. For 401(k) accounts, the contribution ceiling since 2016 has been $18,000, with individuals over 50 allowed to contribute an extra $6,000. With these contribution amounts in mind, the benefit of contributing earlier not only means ultimately saving more, but also the opportunity to contribute less money for bigger results.
Getting the most benefits from these tax-deferred accounts is all about due diligence, informed decisions, and good timing. Don’t be intimidated to jump into the world of retirement savings, no matter what time of life you’re in.
Contact us at IRA Innovations today for experienced help to start saving for your retirement.