Planning for retirement means thinking about how much money you’re going to put away, for how long, and which type of investment option is best for you. Using a Roth IRA is a great option, but many people are unsure of how much they should put away and when they should start investing. For investment help, reach out to our team at Harvest Financial Planning, LLC. In the meantime, here’s some investment advice regarding how much to put into your Roth IRA each month to consider–
What Is a Roth IRA?
A Roth IRA is a type of retirement savings account that is tax-advantaged. This means that you can withdraw your savings without paying any taxes on those withdrawals; however, the contributions that you make are not tax-deductible. Each year, the amount that you can contribute to a Roth IRA changes, as does the income limit for who can contribute (if you make too much money, you can’t put money into a Roth IRA).
Factors to Consider
A Roth IRA is a good choice if you think that your tax burden will be higher in retirement than it is now, as you’ll be allowed to withdraw IRA savings tax-free. As you think about how much money to put into your Roth IRA, here are some things to consider:
- Other investment opportunities. One of the first things to consider when thinking about a Roth IRA is the other investment opportunities available to you. If you only have so much to contribute to retirement savings each year, you may want to put more towards another type of savings account, such as a traditional IRA or 401(k). This may be especially true for the latter if your employer is matching your contributions.
- Maximum contribution. If you have plenty of money to invest, then, ideally, you’ll max out your contribution. For 2020, $6,000 is the maximum amount of money that an individual can put in a Roth IRA (that amount jumps to $7,000 if you’re over 50). Maxing out your Roth is a smart idea if you’re able to do it.
- Your age and earnings. How much you contribute to retirement will likely be based, in large part, on your age and your earnings. Those who make more and who are older should contribute more; retirement is closer, and the more money that can be saved, the better. Those who are younger or who are earning less should still contribute as much as they can, but there may be less pressure to contribute the maximum amount yearly.
Contribute Now So Your Money Has Time to Grow
Our final piece of advice is this: contribute as early as possible so that your money has more time to grow. If you can contribute the maximum amount at the beginning of the year, do so; if you can’t, try to make monthly contributions regularly.
To learn more about investing in a Roth IRA and planning for retirement, reach out to our team at Harvest Financial Planning, LLC. We are available over the phone or online.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.