IRAs allow money to grow without being eroded by taxes. IRA contributions and earnings compound tax deferred until retirement. Over time, the difference in earnings between taxable and tax-deferred investments can equal thousands of dollars. People should begin when they're teenagers if they earn an income. Because the investment will compound with time, the difference between starting at age 18 or 20 compared to age 40 can be thousands of dollars.
Purchase IRAs early in the year.
Each day investors delay means less earnings on investments. Over time, stocks have outperformed other investments. Between 1926 and 1996, the average return on stocks was 10.7 percent compared to 5.1 percent for U.S. Treasury bonds and 3.7 percent for U.S. Treasury bills. The inflation rate for that period averaged 3.1 percent. Consolidate IRA accounts to avoid costly custodian fees.