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Novice
Tax Filers Shouldn't Overlook IRAs; Starting Small Now Can
Provide a Long-term Boost to Retirement Savings
BOSTON--(BUSINESS
WIRE)--First-time tax filers often make the same
mistakes that even the most experienced filers do. An incorrect
Social Security number, a forgotten signature or a simple math
error can cost time and money. But many beginners may not know
that an equally costly oversight could be overlooking an
Individual Retirement Account (IRA) as an important piece of a
long-term retirement savings plan that can also provide savings
on this year's tax return.
While
socking away savings for retirement may seem unrealistic for
someone just starting out, it's important to remember that IRA
contributions can offer significant tax-deferred savings growth
that can pay off down the road. Annual $2,000 contributions can
really add up over time. For example, assuming an 8% market
return(1) over 25 years, an annual $2,000 contribution to an IRA
could grow to $372,204 toward a retirement nest egg(2).
In
addition to getting a jumpstart on saving for retirement, many
filers who make an IRA contribution before April 17 this year
could be eligible to take an immediate tax deduction on their
1999 return for all or part of the contribution amount. Consider
the following savings from two different contribution amounts
for a filer in the 28% federal tax bracket:
| A
contribution to a traditional IRA in this amount... |
...saves
this amount in federal taxes |
| $2,000 |
$560 |
| $500 |
$140 |
Participants
in an employer-sponsored savings plan, such as a 401(k), are
also eligible to open an IRA. While these contributions may not
be tax-deductible, even a small contribution to an IRA can give
a real boost to any retirement savings strategy.
Younger
savers with more time before retirement might consider the newer
Roth IRA. Contributions are not tax deductible, but the money
can grow and be withdrawn tax-free later provided certain
requirements are met.
Tax
filers in the early stages of retirement planning should
consider the tax advantages that IRA contributions offer - for
this year's tax return and down the road. Before filing a tax
return this year, beginners should check out Fidelity's
NetIRA(SM) at fidelity.com/ira
for a guide to understanding and choosing an IRA that could fit
into a sound investment strategy.
-
Hypothetical
example assumes returns are compounded annually and
contributions are made at the beginning of each year.
-
Your
account may earn more or less than this example, and income
taxes will be due when you withdraw from your account.
For
more complete information on any Fidelity fund, including
charges and expenses, call or write to Fidelity or visit fidelity.com
for a free prospectus. Read it carefully before you invest or
send money.
Fidelity
Brokerage Services, Inc., member NYSE/SIPC, 100 Summer
Street,
Boston, MA 02110
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