We’re more than halfway through the year. Have you made your IRA contribution for 2016 yet? If you haven’t, why not? Had you invested your money at the beginning of the year, your new contribution would already be growing.
On average, over 40% of the dollars contributed to IRAs for any given tax year are invested between January and April of the following year. People tend to wait to make their IRA contribution. Guess what percentage of dollars are contributed in January, the first month they can contribute? 10%.
Why not put your money into your IRA earlier and get that money working for you right away?
For some they may be waiting to see if they qualify for a tax deduction or can even put money away in a Roth IRA. Most people’s income doesn’t vary a great amount, so they have a good sense if they are going to receive a deduction or not and whether they qualify to put money into a Roth IRA. You can easily get money back out should you need to because you don’t qualify to make a contribution.
The reality is most people naturally procrastinate.It doesn’t seem like you are giving up much to make your contribution later, but here is an interesting statistic that might change your mind:
Take two investors – they both make the maximum contribution to their IRA, which is $5,500/yr.
Both make contributions for 31 years.
The difference, one of the investors makes their contribution in January, while the other waits until April 15th the following year to make their contribution for the prior tax year.
Assuming the money grows on average at 7% per year, the saver who makes the full contribution in January could have $55,000 in additional savings even though both contributed equal amounts overall. I can think of many ways how I could enjoy that extra $55,000 in retirement.
So make your contribution now for 2016 and get saving so you can be ready to invest in January 2017 – this can be a nice boost for your portfolio in retirement. Listen to my full podcast below:
Date Posted: 07/27/2016 Advice provided in this article is meant for educational purposes only and financial education is important to us. Before making decisions regarding your personal financial situation, please consult an advisor or conduct your own due diligence. If you would like to discuss your Retirement Income Plan with an HCM Wealth Advisor, please give us a call – 513-598-5120. Located in Cincinnati, Ohio, we serve clients in 28 states, and we’d love to help.