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 14 this year could be eligible to take an immediate tax deduction on their 2000 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 . . .saves this amount in
amount . . . 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. Contribution are not tax deductible, but the money can grow and be withdrawn tax-free later provided certain requirements are met.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.

1. Hypothetical example assumes returns are compounded annually and contributions are made at the beginning of each year.

2. 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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