Best Freez

Archive for November, 2009

Most people wait to contribute to their IRA until they file their taxes in April of the year after—a mistake that adds up. For the tax year 1997, for example, you have the right to put $2,000 in your IRA in January 1997. But most people wait until April 1998 to do so. This is an incredible waste of money. If you possibly can, I urge you to put that money away at the beginning of the year rather than at the tax deadline.
If you invest your $2,000 in January and that money sits there earning 8 percent, by the time April 15 comes along you will have $213 more in the account. If you simply keep this up, you’ll have thousands of dollars more over the years you maintain this account.
Look at the larger picture. If in fact you put $2,000 away each year for the next twenty-five years and this money earned 8 percent, after twenty-five years of putting this contribution in every January like clockwork, you would have $157,098 in your IRA. If instead you waited to make this contribution until the end of every December, you’d have $146,211, which is $10,887 less.
If you don’t have $2,000 at the beginning of the year, and so can’t make the investment all at once, start putting $166 (or whatever you can) each month into your IRA for the next twenty-five years; you will still come out better than if you had waited to do it in one lump sum at year’s end. How much better? About $4,700 better. You would have $150,967 rather than $146,211.