Here are a few tips from TIAA-CREF for making the most of your IRA:
1. Start making contributions as early in 2007 as you can. Don’t wait until next April to start thinking about your 2007 IRA contributions. Making small, consistent contributions at regular intervals throughout the year makes it easier on the household budget. As you plan your budget, keep in mind that withdrawals of IRA earnings before age 59Â½ are subject to ordinary income tax and a federal 10% penalty may apply.
2. Contribute the maximum if you can. The only way to reap the full benefit of your IRA is to consistently contribute the maximum every year ($4, 000 in 2007 to a Traditional or Roth IRA; $5, 000 a year if you’re age 50 or more) â€” or as close to the maximum if you can. Even putting in just a few extra dollars every year can potentially make a difference over time, thanks to the power of tax-deferred compounding.
3. Pay yourself first. If you’re serious about saving more money over the long term, then think about arranging for your IRA contributions to come automatically out of your checking or other banking account through regular electronic funds transfers (EFTs). You can change your contribution amount â€” up or down â€” any time.
This is all very sound advice… Starting early and planning ahead makes it all the more easy to maximize your contributions. Paying yourself first via automatic transfers is also a great habit to get into.