I’ve recently opened an IRA (Individual Retirement Account), although I haven’t mailed in the check to fund it yet. It surprises me how few people my age who have started an IRA. My initial funding is only $500.00. Assuming that I do no other fundings for the rest of my life, and assuming that I get an 8% return, when I’m 65, this account will be worth $10,862.00 before taxes, $9,233.00 after taxes. If I add $500.00 each year between now and 65, this will be worth $150,753.00, before taxes. Remember, I only deposited $20,000.00.
My hope is to try to do the maximum deposit each year, which is $4,000.00 until 2008, when it raises to $5,000 a year. If I do that, this will be worth $1,397,252.00 before taxes when I turn 65. Almost $1.4 million! All I deposited was $213,000.00.
I think IRAs are another great retirement tool.