Roth IRAs are super popular these days, but a traditional IRA has plenty of benefits that make it much more appealing than you might think. The traditional IRA may seem like an old school way to save for retirement, but once you get through this list of tips and tricks to get all you can out of your account, you might think it is the best investment you ever made.
Investing early and often is very important if you want to be solvent when you stop working. Retirement is a big step for many people, both emotionally and financially, so you want to be prepared.
Tax Deferred Savings Can Be Lucrative
When you start to save just around $5,500 a year in your mid-twenties, you are going to have a nice little nest egg at the end of 40 years. You are going to enjoy seeing that cash grow tax-free, and, depending on the rate of return, you could have just under $1 million dollars to play with in your golden years.
Keep Your Limits in Mind
These days, you can only contribute a max amount of $5,500 to your traditional IRA annually. So be sure to keep those limits in mind. And remember that your income has to cover your contributions. If you are self-employed, you can open a special traditional IRA that allows you to contribute up to 25% of your income.
You Can Contribute to Your Partner’s Account
If you are married, you can put money from your income into your partner’s account. When you are married, you share everything. You need to make sure that if your husband or wife stays at home, you need to help contribute to the non-working spouse’s account at maximum levels. That gives you more money to work with in your retirement.
Blend Your Work Plan and the Traditional IRA
Even if you have a 401K or some other employer-sponsored work plan, you can still set up and benefit from a traditional IRA. Just be sure to consult a tax professional so you can understand how much of your traditional IRA contributions you can deduct from your income taxes. The tax benefit may not be all that great, but you can benefit from having 2 accounts as you get older.
Set Up a Direct Transfer
Have you ever heard the old adage pay yourself first? Well, this is all about paying your old self first. Set up your traditional IRA with a direct transfer from your account as soon as payday hits. That way you never see the money and you never miss it. You are responsible for taking care of your needs in retirement. Don’t put any present challenges in the way. Pay yourself first and automate that payment.
Do not skimp on your retirement savings. Whether it is a traditional IRA, a 401K or even a savings account, put away what you can for your golden years. Social Security is not going to cut it.