We’re now inside of a month in the countdown to the tax filing deadline. While most of 2011 is already set in stone for those crunching the numbers to report to the IRS, there is still at least one thing investors can do to push the numbers more in their favor by this year’s filing deadline of April 17.
You can continue to contribute to your retirement account up until Tax Day and write it under the 2011 contribution year. Take advantage of the opportunity to contribute as much as you can to fully realize the benefits.
For one, the contributions are tax-deductible. Lightening your tax bill while contributing to your retirement is a win-win situation.
Getting in on the 2011 contribution can make a huge difference down the road as well.
Let’s say you open an IRA and contribute the maximum $5,000 each year with an 8 percent interest rate. In ten years, your account would be worth $78,227, as opposed to $67,432 if you missed out on contributing for the 2011 contribution year.
Not including the $5,000 that you would have contributed, you’d be missing out on nearly $5,800 in interest by delaying by one contribution year!
After 20 years of the yearly $5,000 contributions at 8 percent, your retirement account will be worth $247,114. But if you didn’t contribute in 2011, it would be worth $223,809.
Think about it another way:
If you make a contribution of $5,000 when you’re 35 years old, that amount grows (assuming the 8-percent interest rate) to $50,313 by the time you’re 65! Imagine the wealth you’d accumulate if you made the contribution every year!
Calculate it for yourself with our compound interest calculator.
Find the 2011 contribution limits here.
Filed under: Uncategorized on March 22nd, 2012