To get into this part of IRA basics, let's start with some assumptions:
Let's say you've opened an individual retirement account (IRA) that makes sense for you. And now you're wondering exactly how, and at what level, to fund that account. Some of the questions you're probably asking yourself include:
- Should I write a check once a year?
- Should I try to make smaller, regular contributions?
- Should I plan on using bonuses or windfalls from my sales commission to make deposits?
The simple truth is that, when it comes to IRA basics and funding an IRA, consumers often focus on what account they should open, without giving as much thought to how — and how much or how regularly — they should contribute to it.
The amount you contribute annually depends both on your current financial situation and your retirement goals.
An online calculator like this one from our site at Allybank.com can help you see how your savings will grow over the years, making the picture clearer. A financial planner also can help you determine how much to save to reach your goals.
As for funding your account, some financial planners suggest writing a single check annually. But unless you have the discipline to be sure you won't spend that money elsewhere, the IRA basics to consider might include having a certain amount deposited automatically once a month or pay period.
"The key to success is to automate! You can promise yourself that you'll write a regular check to your retirement account, but over time, you won't," writes Jane Bryant Quinn in Smart and Simple Financial Strategies for Busy People.
Perhaps the best thing about automated deposits is that you can fit them into your budget, and pretty soon they'll become routine. "It's the best way," Georgia Bruggeman, a certified financial planner with Meridian Financial Advisors, LLC, in Holliston, Massachusetts, told Ally Bank in a recent interview. "It makes it so easy. That's what I recommend to all my clients."
The good news is that while many IRAs require a minimum initial deposit of $3,000 or more, an Ally Bank IRA CD or IRA Online Savings Account requires no minimum deposit to open, giving you more freedom to determine how you want to start funding your retirement savings.
For more about IRA basics, such as IRA rollovers, transfers and more, visit the IRA Basics section on Allybank.com, or give our customer care department a call at 877-247-ALLY (2559), where live help is available 24/7.