4 Strategies to Contribute to Your IRA

As an investor, you want to do everything that you can to contribute to IRA investments. Having an IRA can be a fantastic way to save for your retirement. However, if you do not regularly contribute, you will find that you do not have enough money to retire on. Therefore, it is important to utilize a contribution strategy with your IRA. Here are a few potential strategies that you might want to implement for your IRA.

1. Automatic Deduction

Perhaps the simplest and most effective way to contribute to your IRA is to set up an automatic payroll deduction. This involves regularly deducting a certain percentage of your paycheck automatically and depositing it into your IRA. If you work for an employer, you can set it up with your payroll department to do this for you. Therefore, you will get your paycheck and you will never see the money that is deposited into your IRA. It is deposited before the taxes are taken out and therefore does not affect your take-home pay as much. 

2. Automatic Transfer

If you do not want to have the amount of money deducted out of your paycheck, you can also use an automatic transfer to do the job. Many people set this up through their bank or their investment company. This involves an automatic transaction that takes place periodically between your bank account and the IRA. For example, you could set it up to automatically withdraw $50 every week and transfer it into your IRA. Making this process automatic makes it much easier. If you have to consciously think about contributing to your IRA every month, there is a good chance that it will rarely happen. Most people will find alternative uses for the money because they cannot force themselves to save money for something that is so far away. Making it automatic ensures that it is actually going to happen every single month.

3. Rollover

Another way to contribute to your IRA is to rollover funds from an existing retirement account. For example, if you have a 401(k) with your employer, you can elect to transfer funds from the 401(k) into your IRA. This is a very common practice whenever people leave a job. Therefore, this will often be a one-time transaction. However, it can give you a nice head start on the funds in your IRA.

4. Lump Sum Contributions

If you do not like the idea of making small regular contributions to your IRA, you could also choose to use a lump sum contribution method. This would involve sporadically contributing to your IRA in a lump sum. For example, you might choose to take your tax return every year and put the entire amount into your IRA. This would be considered extra money for most people and they can quickly fund their IRA all at once. This type of method will take some discipline because of the larger amounts of money involved.


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