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How Do I Max Out My Retirement Contributions?

I always seem to get this question at the end of the year. How do I go about maxing out my retirement contributions?

The best way to do this is to start at the beginning of the year. Depending on your age contributions to Roth or traditional IRAs can be as high as $6000 a year and this year the new 401(k) can go up to $22,500.  Depending on how frequently you get paid, isn’t it easier to just break up these dollar amounts across all your paychecks and that way instead of defering the huge dollar amount to year end you’re just frequently saving it in between?

I see it happen all the time, people start worrying, or thinking about putting into the retirement in the middle of the year or at the end of the year. At that point most people do not have the total dollar amount put aside that they could contribute. Also, one of the major issues, is that especially with the 401(k), this money must be put aside straight out of your paycheck. Most people cannot handle their entire last few paychecks going directly to retirement from a cash flow standpoint.

One of the best benefits of putting into your retirement over time, is not only the compounding that you received from this type of investment, but also, especially in these economic times, you are really purchasing stocks and bonds at a low price in the hopes/understanding that the values will increase by the time you are ready to retire. I know that a lot of people do not believe that the stocks and bonds will increase, but of course that is up to you and your financial advisor to determine, and depends entirely on how you believe about our economic situation.

Don’t forget, slow and simple just like the tortoise, wins the race!

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