3 Smart IRA Moves

Maybe you're saving in an IRA because you don't have access to a 401(k) through work. Or maybe your employer does sponsor a retirement plan, but you don't participate because you don't like its investment choices.

No matter why you may have landed in an IRA, having that account gives you a real opportunity to sock away a nice chunk of cash for the future. And if you make the following moves, you'll have an even better chance of retiring comfortably.

1. Max out every year

Though the annual IRA contribution limits are lower than those of a 401(k), they still offer ample opportunity to build wealth, especially if you give yourself a lengthy savings window. Currently, you can put away up to $5,500 a year in an IRA if you're under 50 and $6,500 a year if you're 50 and over.

Since these limits aren't nearly as high as the current 401(k) limits ($18,500 for workers under 50 and $24,500 for workers 50 and over), you shouldn't have as difficult a time maxing out. And if you do, here's what your ending balance might look like based on the number of years you save for.

If You Start Maxing Out an IRA at Age:

You'll Accumulate This Much by Age 65 (Assumes a 7% Average Annual Return):


$1.12 million











As you can see, the sooner you start maxing out an IRA, the higher your ultimate savings balance will be. Remember, too, that the annual limits for IRA contributions are likely to increase over time. If you manage to keep up with them, you stand to retire with even more money.

2. Keep your investment fees to a minimum

Just as there's generally no such thing as a risk-free investment, there's no such thing as a free investment. That's because most retirement-plan funds charge fees, whether you're saving in an IRA or a 401(k). What you can do, however, is aim to keep those fees as low as possible.

How? Mainly by putting your money into index funds, which are passively managed, rather than loading up on actively managed mutual funds. Index funds simply track existing indexes, like the S&P 500, and therefore tend to move with the broader market. Because you're not paying for an expert fund manager when you buy index funds, your costs will be considerably lower, and that could make a big difference over time.

Best of all, index funds are capable of delivering the same returns as actively managed funds. Morningstar reports that between 2004 and 2014, index funds actually outperformed actively managed funds across the board -- and that's reason enough to avoid those hefty fees.

3. Check up on your investments every quarter

Setting up your IRA investments is only half the battle. Once you have your asset mix in place, it's important to keep tabs on how your investments are doing to ensure that they're helping you meet your goals. Therefore, while you don't need to go crazy checking in on your IRA funds week after week, it's smart to do a quarterly review to make sure your investments are performing well. And if not, you'll need to do some digging as to why, and perhaps make changes within your portfolio.

Also, as you progress in your career, you may come to find that your personal tolerance for risk changes. Maybe you started out with a conservative perspective and are now realizing you're OK with being more aggressive. If that's the case, then you'll want to shift some assets around to align with your new strategy. Either way, check in on your IRA from time to time. You'll appreciate having done so in the long run.

Saving in an IRA is an important step on the path to a secure retirement. If you aim to max out annually, keep your fees low, and follow up on your investments, you'll be in an even better position to enjoy a healthy income stream during your golden years.

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