It Doesn’t Pay To Wait : 401k rollover to an IRA

Fifteen months of waiting can really help to add over time. The following hypothetical illustrates the difference in potential tax gains from the financing of a IRA on January 1st of this year, the first funds available, as opposed to waiting for the deadline of 15th April the following year , last, you can fund your IRA.

This calculation assumes a rate of 7% return, and that the maximum contribution is made each year. The contribution limit is $ 4,000 in 2005 and increases by $ 5,000 in 2008. This calculation also includes the full catch-up contribution in the year, the individual becomes age 50 and annually thereafter (the catch-up is $ 500 in the years 2002 to 2005 and increases $ 1,000 in 2006). The rate of return is calculated on an annual basis and is for information purposes only, it is not currently available investments.

Using the above assumptions, a fund of its first 25 years of the IRA in January each year, as opposed to 15 April of next year, will end up with $ 1047689 at the age of 65 years, but only $ 980,254 if Waites until 15 April of the following year to fund the IRA. That ’sa $ 67,435 to increase the potential savings for not waiting.

At age 45 the difference in potential savings is $ 19,939.

Even at age 60 has increased the potential for savings is $ 2272

For couples who adds to their IRA each year has increased the potential for savings is doubled, that of the individual

Remember:

Annual contribution limits are set at $ 4000 per year and increase to $ 5,000 in 2008. Investors who are aged 50 and over are eligible for catch-up contribution of $ 500 more per year in 2002 to 2005, and increases by $ 1,000 from 2006.

Investors can add Rollover IRA assets at any time.

Take advantage of the small contributions to an IRA to increase your potential tax deferred growth, or tax-free growth using a ROTH IRA.