Appropriate and suitable investing is certainly one key to accumulating a large enough nest egg by the time you’re ready to retire. But at least as important as your investment approach is you making regular contributions to your account (as in, doing so every single year), and contributing as much as possible (that is, up to the permitted contribution limits for your retirement account).
Giving your account contributions the greatest amount of time to grow is something that you can’t make up in later years. Since your annual contributions to a self-directed IRA are capped, if you miss the opportunity to make a maximum contribution to your account in any given year, you’ll never be able to recapture that opportunity later.
For the 2015 tax year, the maximum annual contribution to a self-directed IRA is $5,500 (or $6,500 if you’re age 50 or over). Here are some techniques for making that maximum contribution to your account this year, as well as in all future years before retirement.
Use Your Tax Refund.
While the most financially prudent situation is to neither owe taxes nor be due a refund at the end of the year (since no refund means that you haven’t given the government an interest free loan of the excessive withholdings that were made from your paychecks), many people still like the “forced saving” element of getting a refund check after they file their returns.
Receiving a refund that may amount to several thousand dollars, or more, these taxpayers now have access to a lump sum of money that they perhaps wouldn’t have been able to accumulate otherwise. While many individual choose to use their refunds as an opportunity to splurge, or treat themselves to something nice, consider this: using your refund check to make some or all of your annual self-directed IRA contribution will free up your budget later and provide you with greater financial flexibility.
In fact, if you file early enough in the year, you may be able to receive back your refund check in plenty of time (that is, before April 15) in order to make some or all of your self-directed IRA contribution for that same tax year.
Incorporate Your Contributions into Your Monthly Budget.
Because the key to success in retirement saving is consistency, you can meet your annual contribution goal by taking steps toward that goal each and every month. Determine how much you need to contribute each month to make the maximum contribution, and work that amount into your budget.
Auto-Debit or Direct Deposit.
Even if you don’t have a formal budget set out for your family, you can still meet your monthly savings target by utilizing tools such as direct deposit (have an appropriate amount taken out of your paycheck each month and deposited directly into your self-directed IRA), or automating monthly transfers from your checking or savings account to your self-directed IRA.