Living with volatility
Living with volatility
We don’t anticipate the market roller coaster will get less bumpy in the second half of 2025.
We don’t anticipate the market roller coaster will get less bumpy in the second half of 2025.
07/08/2025
RETIREMENT PLANNING
Saving to your IRA now could make a big difference later
Key points
Benefits of investing early
Making annual IRA contributions earlier in the year has the potential to speed up your savings through annual returns.
Making time count
With a 15-month contribution window for IRAs each year, investing early may pay off for your retirement savings goals.
People often wait until the deadline to contribute to an individual retirement account (IRA)—around the April 15 tax filing deadline after the taxable year. But you could accelerate the savings process by contributing during the current tax year instead of at the deadline.
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For instance, if you start contributing the maximum $7,000 to your plan a year earlier, that essentially allows you to start the investment process a year earlier! This could potentially add tens of thousands of dollars to your retirement account over your lifetime. (See: IRA contribution rules and limits)
Whether you invest the maximum amount allowed ($7,000 for those under age 50 in 2024 and 2025) or a lesser amount, starting earlier in the calendar year may have a significant impact on your total savings over the long term. In the following illustrations, we show the impact that earlier contributions would have for an investor who contributes $7,000 a year.
As a hypothetical example, at an average annual return of 5%, after 10 years of $7,000 annual contributions made starting on January 1 of a tax year, your pre-tax value would have grown to $92,448—that’s $11,403 more than your account would be worth if you had started with contributions made at the April deadlines. And as the table below shows, after 40 years, the returns from the early investment would have added $49,280 to the total pre-tax IRA savings.
$7,000 a year at 5% annual growth
| Period | Total value of contributions started at beginning of period | Total value of contributions started one year later in the period | Difference |
|---|---|---|---|
| Period | Total value of contributions started at beginning of period | Total value of contributions started one year later in the period | Difference |
| 1 year | $7,350 | $0 | $7,350 |
| 10 years | $92,448 | $81,045 | $11,403 |
| 20 years | $243,035 | $224,462 | $18,573 |
| 30 years | $488,326 | $458,072 | $30,254 |
| 40 years | $887,878 | $838,598 | $49,280 |
This example is hypothetical and is not intended to represent the performance of any particular investment product, nor does it take into consideration product expenses, fees or taxes. Results would be lower if costs were included.
The difference would be even more significant for someone earning 10% per year. In fact, after 40 years, returns from the early investment would have added more than $300,000 to the total pre-tax IRA balance:
$7,000 a year at 10% annual growth
| Period | Total value of contributions started at beginning of period | Total value of contributions started one year later in the period | Difference |
|---|---|---|---|
| Period | Total value of contributions started at beginning of period | Total value of contributions started one year later in the period | Difference |
| 1 year | $7,700 | $0 | $7,700 |
| 10 years | $122,718 | $104,562 | $18,156 |
| 20 years | $441,017 | $393,925 | $47,092 |
| 30 years | $1,266,604 | $1,144,458 | $122,146 |
| 40 years | $3,407,963 | $3,091,148 | $316,815 |
This example is hypothetical and is not intended to represent the performance of any particular investment product, nor does it take into consideration product expenses, fees or taxes. Results would be lower if costs were included.
Timing is an important factor in saving for retirement. Opening an IRA can help you get started on your retirement savings plans for the future, and investing early in it each year may help give the value of your plan a boost.
The information provided is not intended as a source for tax, legal or accounting advice. Please consult with a legal and/or tax professional for specific information regarding your individual situation.
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