Fully Fund Your Retirement Accounts for 2015 and 2016
Before April 18th, fully fund your retirement accounts for 2015, and we would recommend that you begin to fund 2016 as well. The sooner your accounts are funded, the sooner your money goes to work for you. The following table shows contribution limits for 2015 and 2016.
Adding to the funds you have saved for retirement as a number of big benefits. The first is that your money grows tax free. Taxes can eat away 40% or more of the earnings on your investments depending upon your tax bracket. That’s a big bite out of the funds you have available to benefit from compounding over time. Active investment strategies, where short term profits are more likely, also benefit from tax-deferral, again avoiding the erosion of funds available for compounding that might be taxed at the investor’s top tax rate. Retirement accounts can also minimize the tax bite of passing assets on to heirs. Retirement accounts are protected by law from creditors. Equally important, retirement accounts tend to be “hands-off” accounts. These are funds that investors tend to dip into only when absolutely essential, creating a savings discipline that other account forms may lack.
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