US News and World Report had a little piece where they discussed some good New Year’s resolutions related to retirement and I thought that I’d put each of them through their paces. The first retirement resolution was to start and contribute to an IRA.
Individual retirement accounts (IRAs) are currently the largest repository of retirement funds in the United States. Some 56 percent of Americans expect to rely on IRA savings for retirement, Fidelity found. But as of 2004, only 29 percent of families owned an IRA or Keogh, with a median value of $30,000, according to the Employee Benefit Research Institute (EBRI). The deadline for making a 2006 contribution to a tax-advantaged IRA is April 16, 2007, or the date you file your federal tax return.
I think it is crucial that every working person take advantage of the tax benefits of contributing to a Roth IRA, especially if Fidelity’s reports that 56% of Americans expect to rely on IRA savings for retirement. Roth contributions are not tax deductible but the earnings are and the account grows tax free, which is a very powerful proposition.
Source: US News and World Report