Again, it’s time to file your income tax return and with it, the classic question comes back: Should I open an IRA? The truth is that it is worth your while to open an individual retirement account or IRA because, depending on the product you choose, you could get different forms of tax relief while saving money for your retirement. If you save not only will you have enough money to meet your financial responsibilities, but also to deal with unexpected situations like a prolonged illness, among others. If you want to live your retirement with peace of mind, you must make important decisions today.
The most important aspect
Remember that an IRA is a vehicle towards retirement. Even without bringing the interests IRAs generate into the equation, a simple mathematical exercise will prove the importance of saving as early as possible. If you save $100 per month for 20 years, you will have $24,000. But, if you find it difficult to set aside $100 each month, start with $50. You can contribute up to a maximum of $5,000 to your IRA every year. Saving this amount provides impressive results. In 20 years, you’ll have $100,000 in savings. The chart below will help you better visualize just how much your savings can grow.
What if I don’t have the money right now?
You have options. You can open an account that allows you to contribute as often as you’d like, say every payday. For example, if you get paid weekly you should save a certain amount each week and then transfer all that money to your IRA when April rolls around. Before opening an IRA, we recommend that you evaluate the options available, consider the initial contribution amount each one requires and what are their characteristics. This way you can choose an IRA that is within your reach and best adjusts to your expectations in terms of performance when it’s time to retire.
In addition, if you have a genuine emergency that merits withdrawing funds, you will have money available to deal with the matter. But be aware that IRAs have restrictions so you won’t spend your savings easily, as their primary goal is your post-retirement financial wellbeing.
Don’t deny yourself the opportunity to invest in your future starting today. Get this year off to a great start by contributing an amount that fits your reality and try to increase it next year.
For more information on this and other financial topics, go to popular.com/finanzas.
Product offered by Banco Popular de Puerto Rico. The information and general descriptions found in this article are designed to help you understand some of the factors that you should generally consider when evaluating the appropriateness of any strategy or investment in your retirement plan. Any description included is for informational and educational purposes and for independent consideration only; it is not meant to be considered or regarded as advice or as a suggestion to perform (or refrain from performing) any particular action. By providing this information, we assume that you are capable of evaluating this information and the general descriptions found here to exercise your independent judgment. This material was prepared for informational purposes only and should not be regarded as advice of any kind. Banco Popular de Puerto Rico, its subsidiaries and/or affiliates do not engage in providing legal, accounting or tax advisory services. If legal, accounting or tax advisory services are required, you should seek the services of a competent professional. Investment products are not insured by the FDIC, are not deposits or obligations of, nor are they guaranteed by Banco Popular, its subsidiaries or affiliates, and may lose value. Insurance products are not insured by the FDIC or by any government agency, are not deposits or obligations of, nor are they guaranteed by Banco Popular, its subsidiaries or affiliates. Some insurance products may lose value.