The importance of setting yourself up for your Golden Years should not be overstated. Even if you think you’ve left it too late – think again. While you should consider putting some of your hard earned cash into an individual retirement account (IRA) at an early age, the next best time to get started is NOW.
However, trying to estimate how much you are likely to save for your retirement via an IRA is not easy. You need to consider a range of factors such as your annual salary, how many years you’ll be saving for, what age you’re likely to retire, and of course – your starting balance.
To make things a lot easier for you, we’ve created an IRA calculator. Simply enter the required figures into the calculator below to get an idea of your projected savings.
Try out our IRA Calculator Now:
What to consider when using the IRA calculator?
The IRA calculator is a lot more complex in comparison to other areas such as savings bonds or stocks and shares, as there so much more to consider. Due to the sheer length of the time you’ll likely be saving for, a lot can change over the course of the IRA. Check out some of the most important things to consider when using the IRA calculator
When you first get yourself set up with an IRA, you will be required to deposit a lump sum. While this could be as low as $100, you might instead be sitting on a larger cash balance that you want to invest straight away. Essentially, the more than you start with, the faster the rate that your IRA will grow. If at all possible, you should consider trying to invest as much as possible at the start for this very reason. You can play around with the IRA calculator by seeing what impact the starting balance can have on your expected retirement amount.
The amount that you invest into your IRA on a regular basis is equally as important as your starting balance. After all, you are likely going to be saving money for decades, so if anything, the amount that put away throughout the course of the IRA is probably more important than what you start with. On the other hand, it is extremely difficult to know what your circumstances will be further down in life.
While at present you might be able to commit to a certain amount at the each of each month, this might not always be the case. Equally, it’s likely that as you progress through your career, your income will increase, and thus, you’ll be able to put more into it. This is why you should always re-visit the calculator if and when your financial circumstances change.
You also need to consider your age, as well as the age that you plan to retire. This is important because it will dictate the length of time that you are planning to save for. While entering your current age is straightforward, attempting to ascertain when you are going to retire is near-impossible. As such, when you enter your projected retirement age, make sure you remember that you could retire sooner, or even later.
Expected Tax Benefits
One of the key benefits to investing in an IRA is that you will be accustomed to a significant number of tax benefits. While the amounts you can save are easy to calculate now, there is no guarantee that these rates will remain constant throughout the duration of your IRA. In fact, it is almost certain that this will change at some point, so do bare this in mind. As the tax breaks available via an IRA are often based on your annual income, you also need to make some considerations regarding your future expected earnings.