After you open an IRA account, you might wonder how to make it count. Read on to find out where to park your money so you can retire with a sizable nest egg. From mutual funds to catch-up contributions, check out these steps you can take to grow your IRA account.
Start With Mutual Funds
You’ve probably heard it before, but diversification is the key to consistent success with any investment account. Mutual funds and exchange-traded funds, or ETFs, are your best bet to ensure diverse, steady growth. That’s because an index fund gives you a bunch of investments for your buck, as opposed to purchasing stock in a single company.
This means that, while some companies stumble, others will hold the line or grow, meaning your portfolio won’t see massive dips as you could notice if all your eggs were in one basket.
If you’re 50 years old (or older) and are relatively new to saving for retirement, don’t worry! While younger employees are capped at $20,500 of contributions, anyone 50 and up can contribute an additional $6,500 a year! There’s still plenty of time to set yourself up for financial success with catch-up contributions.
This is also a great opportunity to check your contribution settings and update them if you haven’t—these numbers change from year to year.
Required Minimum Distributions
You may not need to think about RMDs for a little while, but it’s critical to factor them in. Once you’re 72 years old, you must withdraw “required minimum distributions” from your retirement account(s). If you don’t, you will lose money.
Traditionally, you will incur a penalty equaling 50 percent of your required withdrawal amount. This is an unnecessary waste that typically occurs when someone doesn’t know RMDs exist—remember them!
Now that you know these steps you can take to grow your IRA account, start saving now to ensure the best future possible!