Here's how to put time on your side and reap big rewards in the years to come.
Make Your 2014 IRA Contribution Now
Most people understand that contributing to a retirement account is a great way to save for your golden years. Taking advantage of benefits like tax-deferred growth can help your savings grow a lot faster and get upfront tax breaks to boot.
When it comes to actually putting money into IRAs and other retirement accounts, though, many people fail to follow through. Luckily, the tax laws give you until mid-April of the following year to make contributions to an IRA. So if you haven't yet made a 2013 IRA contribution, you still have more than three months to gather money together and get it into your retirement account and enjoy the tax benefits immediately.
Still, rather than waiting until the last moment to contribute to an IRA, the smart thing to do is to start thinking about your earliest opportunity to get money into a tax-favored retirement account. Doing so can add thousands to your eventual retirement nest egg. That's why making your 2014 IRA contribution now could be the best money move you'll make all year.
Put Your Money in Play
Over the long haul, stocks have gone up more often than they've gone down. That means that most of the time, the longer you wait before you make an investment, the more you give up in lost gains.
That's been especially true in 2013, as you can see from what would have happened if had invested in the following stocks or exchange-traded funds at the beginning of 2013:
|Stock/ETF||$5,000 Invested on Jan. 2, 2013 Is Now Worth:|
|Tesla Motors (TSLA)||$21,300|
|Best Buy (BBY)||$17,000|
|Delta Air Lines (DAL)||$11,100|
|SPDR S&P 500||$6,400|
The dollar figures above show what investments in each of these made at the beginning of 2013 would be worth today for those who got their IRA contributions in at the first possible moment. Admittedly, the individual stocks listed above are among the best performers in the market during 2013, but even a plain-vanilla index-tracking fund like the SPDR S&P 500 gave investors an almost 30 percent bump over those who are just now getting around to making their IRA contributions.
The Early Bird Avoids Complications
Great returns aren't the only reason to work fast in getting your retirement contributions made early in the year. Waiting until the last possible moment often causes complications with your financial institution, as IRA providers can get bogged down in the last-minute rush and make mistakes that could jeopardize your ability to make retirement contributions for a given year at all. If you make your IRA contributions early, there's plenty of time to iron out any wrinkles that may arise.
Moreover, most people find it difficult to come up with $5,000 to invest in one fell swoop, which sometimes leaves procrastinators contributing less than the maximum amount. Getting started earlier lets you contribute more manageable sums at regular intervals throughout the year.
Setting up a retirement account is easy, and so there's really no good excuse for waiting any longer than you have to before contributing. By saving for retirement right after the year begins, you'll ensure that you'll get 2014 off to a great start for your finances.
You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+. He doesn't own any of the stocks mentioned in this article. The Motley Fool recommends Netflix and Tesla Motors. The Motley Fool owns shares of Netflix and Tesla Motors.