An IRA is an Individual Retirement Account, a vehicle, that allows you to save after-tax money for the future while receiving tax credits today. It may be comprised of stocks, bonds, mutual funds, and other assets. You have up to the tax-filing deadline to qualify for the previous tax year.
For the 2016 tax year, eligible taxpayers can contribute up to $5,500 to an IRA or $6,500 after age 50. This investment has the ability to grow significantly over time so it is a good value proposition.
According to Fidelity Investments, if you are age 35 and invest the maximum $5,500 in 2016 to an IRA contribution for growth, that one contribution could grow to almost $59,000 over 35 years. If you are age 50 or older, and contribute $6,500, your investment could grow to more than $69,000 over 35 years. This is calculated using a 7% long-term compounded annual hypothetical rate of return and assumed the money stays invested the entire time. So no matter which life stage you are in, you can reap the benefits of an IRA.
Using Fidelity’s chart below it shows that if you were to start saving early and then stop after ten years, you may still have more money than if you started later and contributed many more years.
Essentially, there is no time like the present, so start thinking about your future today. Accounts can be opened at most financial institutions.
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