Fidelity Investments recently did a survey called "Retirement Trends." It found that 96 percent of Americans who are saving for retirement don't know what the current contribution limit is for an individual retirement account. Some of them guessed as low as $1,000. The truth is that the most you can put into an IRA in 2005 is $4,000, up from $3,000 in 2004.
If you don't know the facts about retirement, you might miss out on opportunities. When they retire, workers of today will have to deal with higher health care costs, less money from their pensions, and a higher cost of living. That's why it's important to put as much money as possible into tax-advantaged accounts like IRAs as soon as possible.
IRAs are a smart way to save money, but some investors might not do it because they believe some common myths.
Myth No. 1: The money I save in my 401(k) should be enough.
According to the Retirement Trends survey, nearly one-third of Americans in their prime saving years who haven't opened an IRA account yet think their 401(k) savings will be enough for retirement. Fidelity, on the other hand, says that retirees will need between 80% and 100% of their income before retirement to live comfortably. Using an IRA now to add to programmes at work can help investors make sure their savings will keep growing and last until they retire.
- Myth No. 2: To open an IRA, I need thousands of dollars all at once.
One in four people who don't have an IRA but were asked say they can't afford the initial investment needed to open one. This may make it hard for them to save even more for retirement. But getting started without a lump sum is easy with a Fidelity SimpleStart IRA. All you have to do is set up automatic monthly payments.
Myth No. 3: IRAs are only for older people with a lot of money to save.
In reality, younger investors have the most to gain from starting to save early because they have more time on their side. According to the Retirement Trends survey, almost two-thirds of young adults have started saving for retirement before they turn 30. That's good news. One of the best ways to plan for the future is to start saving as soon as possible.
