Not that long ago, you reviewed your financial health and made the wise decision to open an Individual Retirement Account (IRA). Since then, daily expenses have crowded out your ability to make consistent contributions. Read on to reconnect with the reasons you first opened your IRA and why you should max out contributions every year.
1. Tax-Free Compounded Growth
Any interest, dividends, or capital gains earned within your account grow tax-free when you contribute to an IRA. Those dollars can benefit from compounding interest, which happens when you earn interest on your original principal - and that interest earns interest.
Let’s say you deposit $100 into an account earning 3% annual compounded interest. If you leave it there for a year, your balance would be $103 at the end of that time period. For 2022, the maximum annual contribution limit is $6,000. If you're age 50 or older, you can contribute up to $7,000. Contribute the maximum allowed to make the most of your account.
2. Penalty-Free Withdrawals Options
If retirement is 30+ years away, increasing your annual IRA contributions can be scary. What if you need the money and you've already depleted your emergency savings account? The Internal Revenue Service allows for penalty-free IRA early withdrawals under certain circumstances.
3. Extended Contribution Periods
The IRS allows contributions until Tax Day (April 15), following the annual contribution year. This means that if you haven't maxed out your 2022 annual contribution limit by December 31, 2022, you still have time to achieve your savings goal. You have until April 15, 2023, to add more money to the account for the 2022 plan year.
We encourage you to recommit to contributing to an IRA to help secure your retirement future. If you're unsure whether your IRA meets your needs, speak with a Vermont Federal CFS Financial Advisor*. They can review your financial situation to help ensure that contributing maximum dollars to your current IRA makes sense. Schedule a complimentary, no-obligation consultation today!
About Vermont Federal Credit Union
Vermont Federal Credit Union is a $900 million-plus full-service, not-for-profit, cooperative financial institution that has served Vermonters for more than 70 years, with eight locations currently serving over 50,000 members. Members are part of a cooperative, meaning they share ownership in the Credit Union and elect a volunteer board of directors. Vermont Federal Credit Union provides membership to anyone who lives, works, worships, or attends school in Vermont. Vermont Federal Credit Union is committed to supporting its communities and helping Vermonters prosper, no matter where they may be on life’s journey. Learn more about Vermont Federal Credit Union.
AVAILABLE THROUGH CUSO FINANCIAL SERVICES (MEMBER FINRA/SIPC)*
*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members. Financial Advisors are registered to conduct securities business and licensed to conduct insurance business in limited states. Response to, or contact with, residents of other states will be made only upon compliance with applicable licensing and registration requirements. The information in this website is for U.S. residents only and does not constitute an offer to sell, or a solicitation of an offer to purchase brokerage service to persons outside of the United States.
