IRA Catch Up Limits Help Baby Boomers
If you fall into the Baby Boomer generation, having been born
between 1946 and 1964, this 3rd stage of life, retirement, is
right in front of you. Keep in mind, that potentially, this is
the longest stage of life, possibly lasting 20-30 years. Dont'
fail to prepare for this very important transition into your
retirement years.
The prospect of actually becoming a retiree looms larger as the
years go by. Fortunately, it's just become a little easier to
build savings for your retirement years. Why? Because, starting
Jan. 1, you can put in $1,000 in "catch-up" contributions to
your traditional or Roth IRA, up from $500 in 2005. So, given
the $4,000 annual limit for regular contributions, you can put
in a total of $5,000 to your IRA in 2006.
Fully funding your IRA should be one of your top investment
priorities. Keep in mind that IRAs offer two major benefits:
Tax advantages - If you have a traditional IRA, your earnings
have the potential to grow tax-deferred, so your money can grow
faster than it would in an investment on which you paid taxes
every year. (You will eventually have to pay taxes on your
earnings, but, by then, you may be in a lower tax bracket.)
Also, depending on your income level, your contributions may be
tax-deductible. When you have a Roth IRA, you can withdraw your
contributions at any time, free of taxes. You can also take out
earnings, free of taxes, as long as you don't begin withdrawals
until you are 59-1/2 and you've had your account for at least
five years. Variety of investment options - You can invest your
IRA in virtually any security you choose - stocks, bonds,
Treasury bills, certificates of deposit, etc. In fact, you're
not confined to just one type of investment within your IRA; you
can create a diversified portfolio containing a variety of
holdings.
Given these tax advantages and this investment flexibility, it's
almost certainly a good idea to "max out" on your IRA every
single year. Of course, it's not always that easy to come up
with $5,000 at one time, but you don't have to. You can fund
your IRA over the course of a year by putting in about $416 per
month. And, to make it even easier for you to completely fund
your IRA, you could have that $416 moved automatically, via a
bank authorization, from your checking or savings account to
your IRA.
But however you do it - over 12 months or right away - put the
full amount into your IRA. Along with your 401(k) or other
employer-sponsored retirement plan, your IRA is one of the best
retirement-savings vehicles you have available. And now that you
are on the "plus" side of 50, you'll want to really focus your
efforts on making sure you have the resources available to enjoy
the retirement lifestyle you deserve.