Biggest Mistakes People Make With Their IRA
IRAs are something we are told we need to set up for retirement. However, many individuals don’t know much beyond the fact that they contribute money to their program. This can lead to finding out later down the road that you made the wrong choices and all your years of hard work didn’t set you up for retirement like you thought. It’s time to start learning more about what IRAs are and what mistakes you need to avoid when using them.
Not Starting Early
Retirement is not something most think of during their early adult years. Things like rent, student loans, credit card debt, and other expenses seem more of a priority. However, taking even a small percentage of your paycheck, say 5 percent, and contributing it to your IRA fund can make an extravagant difference in the future. You’re not likely to notice such a small percentage coming out and that small amount can turn into a large amount with time.
Not Contributing Enough
You don’t want to get to your late forties and realize that you haven’t saved anywhere near the amount of money you will need for your retirement. This happens to a lot of people. Many end up working far past their retirement date and others end up finding part-time jobs after a few years into retirement to help supplement the bills. You should be planning out your contributions to ensure you will have enough by the time you reach retirement. This may mean depositing your bonuses, raises, and other extra income.
Not Knowing The Details
Different IRA accounts come with different rules. These include things like when you can withdraw your money, how much you can contribute each year, when taxes are taken out, and who has access to the fund in the case of your premature death. Having an answer to all of these questions is imperative so that you can plan your life around the QuestIRA – 401K Open Account that you setup. A good rule of thumb is that any question that comes to mind about your retirement account, you should being finding an answer to it. Keep informed about your account and any changes to the law that may affect it.
Not Maximizing Your Contribution
One of the biggest mistakes that individuals make when it comes to their IRA is not funding it to the fullest contribution allowed. As of 2017, the maximum contribution amount for the year is $5,500 or $6,500 if you are over 50. The money you are putting in your contribution is considered tax deductible. This means you can use all that money from your income to fund your IRA so it can compile overtime to a much larger amount.
Missing Out On Spousal IRA
Just because your spouse isn’t working, doesn’t mean they can’t have an IRA. A Spousal IRA for non-working spouses allows those who are unemployed to make the same contributions their employed spouse does to their own IRA fund. This works as long as the working spouse makes enough income to cover both the IRA yearly contributions. For example, if both spouses make a $5,000 contribution per year, the working spouse must make at least $10,000 per year.
By learning more about your IRA you can start making your retirement account work for you. Pay attention to these mistakes above and ensure that you don’t make them or change what you are doing if you are currently making any one of them. Your retirement fund is something you need to think about now to ensure it is there later.