Leverage this investment opportunity
The investment decisions you make today may have a big impact on how you spend your time and money tomorrow. Don’t miss out on the opportunity to make an additional contribution to your Individual Retirement Account (IRA) before the tax deadline.*
IRAs are one of the most powerful and flexible tools to accumulate funds for retirement while reducing tax liabilities. The maximum contribution amount is $6,000 ($7,000 if your age 50+), but contributing any amount can make a large difference when you retire. Many of the benefits of IRAs are obvious – tax deferred earnings, potentially a tax deduction with a regular IRA and the permanent tax-free nature of a Roth IRA. Withdrawals from the Roth IRA account may be tax free, as long as they are considered qualified. Limitations and restrictions apply. Withdrawals prior to age 59 1/2 or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.
Two other not-so-obvious benefits should not be overlooked:
- Making IRA contributions forces you to save. Saving more automatically increases the amount you accumulate. Once this saving becomes a habit, you may not even notice you are doing it.
- By contributing early and often, your IRA balance has the opportunity to grow even more.
The tax deferred compounding within a traditional IRA allows your money to grow faster since you do not have to pay any taxes until you withdraw funds from the account. A Roth IRA differs from a traditional IRA in that taxes are paid when the contribution is made, not when the funds are being withdrawn.
There may be other uses for the funds that seem more urgent – a vacation, a down payment on a car, furniture or maybe just leaving the funds in a regular account to build some liquidity – but the cost of delaying to start contributing to your IRA can be significant. Take advantage of the tax deferred compounding within the IRA to prepare for a financially secure retirement. Even contributing now instead of next April can help put you ahead. Make your annual contribution today, or talk with an advisor to learn more about saving for your goals.
*For a comprehensive review of your personal situation, always consult with a tax advisor. Neither LPL Financial, nor any of its representatives may give tax advice.
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