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Take advantage of higher IRA

Charlie Wick and Tina DeWitt

Now that it’s 2006, you are one year closer to retirement. Of course, if you are still in your 20s, this milestone may not mean that much to you. But if you are 50 or older, the prospect of actually becoming a retiree looms larger as the years go by. Fortunately, it’s just become a little easier to build savings for your retirement years. Why? Because, as of Jan. 1, you can put $1,000 in “catch-up” contributions into your traditional or Roth IRA, up from $500 in 2005. So, given the $4,000 annual limit for regular contributions, you can put a total of $5,000 into your IRA in 2006.Fully funding your IRA should be one of your top investment priorities. Keep in mind that IRAs offer two major benefits:- Tax advantages – If you have a traditional IRA, your earnings have the potential to grow tax-deferred, so your money will grow faster than it would in an investment on which you paid taxes every year. (You will eventually have to pay taxes on your earnings, but, by then, you may be in a lower tax bracket.) Also, depending on your income level, your contributions may be tax-deductible. When you have a Roth IRA, you can withdraw your contributions at any time, free of taxes.You also can take out earnings, free of taxes, as long as you don’t begin withdrawals until you’ve reached age 59 12 and had your account for at least five years.- Variety of investment options – You can invest your IRA in virtually any security you choose – stocks, bonds, Treasury bills, certificates of deposit, etc. In fact, you’re not confined to just one type of investment within your IRA; you can create a diversified portfolio containing a variety of holdings.Given the tax advantages and investment flexibility, it’s almost certainly a good idea to “max out” on your IRA every single year. Of course, it’s not always that easy to come up with $5,000 at one time, so keep in mind that you can fund your IRA over the course of a year by putting in about $416 per month. And, to make it even easier for you to completely fund your IRA, you could have that $416 moved automatically, via a bank authorization, from your checking or savings account to your IRA. On the other hand, if you can possibly afford to pay the full $5,000 in the first few weeks of the year, you may well end up with more money in the long run. That’s because you’ll be giving your money more time to grow – and, as an investor, time can be your greatest ally.But however you do it – over 12 months or right away – put the full amount into your IRA. Along with your 401(k) or other employer-sponsored retirement plan, your IRA is one of the best retirement-savings vehicles you have available. And if you are on the “plus” side of 50, you’ll want to really focus your efforts on making sure you have the resources available to enjoy the retirement lifestyle you deserve.Charlie Wick and Tina DeWitt are investment representatives with Edward Jones. They can be reached in Eagle at 328-4959 and in Edwards at 926-1728.Vail, Colorado


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