The Importance of Regular Contributions to Your IRA

Saving for retirement can feel daunting, but making regular contributions to an Individual Retirement Account (IRA) is one of the simplest and most effective ways to secure your financial future. Even if retirement seems far off, starting early and contributing regularly to your IRA can make a significant difference. Here’s why these regular contributions are so important and how they can benefit you in the long run.

1. Harnessing the Power of Compound Interest
One of the biggest advantages of contributing to an IRA is compound interest, which means you’re earning interest on both your contributions and any previous interest earned. When you make regular contributions, even small amounts, your IRA grows faster because you’re continually adding to the base amount that earns interest. Over time, this compounding effect can substantially increase your retirement savings.

For example, if you contribute just $200 a month starting at age 30, you could end up with over $250,000 by age 65, assuming an average return rate of 6-7% per year. If you wait until age 40 to start contributing, you’d only have around $120,000 by retirement with the same contribution amount. Regular contributions let you make the most of your money through compound growth.

2. Taking Advantage of Tax Benefits
IRAs offer tax advantages that help your money grow faster. A Traditional IRA allows you to make tax-deductible contributions, meaning you can reduce your taxable income and lower your tax bill in the present. With a Roth IRA, contributions are made after-tax, but your withdrawals in retirement are tax-free. This tax-advantaged growth can mean more money in your pocket when you need it most.

Regular contributions can help you consistently take full advantage of these tax benefits. If you wait until the end of the year or only make occasional contributions, you might miss out on the full potential of these tax perks each year.

3. Avoiding the Last-Minute Scramble
One of the downsides to irregular contributions is the stress of trying to “catch up” later. If you put off saving, you may find yourself having to contribute a large sum toward the end of the year to meet your retirement goals. This last-minute scrambling can strain your budget and potentially limit your contribution options, as IRAs have annual contribution limits. For 2024, the limit is $7,000 for those under 50 and $8,000 for those 50 or older.

By making regular, smaller contributions throughout the year, you can meet your goal without a financial squeeze.

4. Building a Savings Habit
Saving is a habit, and the more you practice it, the easier it becomes. When you commit to regular IRA contributions, you make saving a natural part of your monthly budget. Over time, this can lead to a greater sense of financial discipline and security, making it easier to stick to your retirement goals.
Setting up automatic transfers from your bank account to your IRA is one way to make this habit even easier. With automatic contributions, you don’t have to worry about remembering to save; it happens on its own. Contact the GCU Call Center to assist you with setting up automatic contributions to your current IRA.

5. Staying on Track with Your Retirement Goals
It’s easy to underestimate how much you’ll need for retirement, especially with inflation, healthcare, and the possibility of a longer retirement lifespan. Regular contributions to your IRA help you stay on track with your retirement goals and give you a clearer picture of your progress. Each month, you can watch your balance grow and assess if you’re on pace to meet your target.

If your circumstances change—like a salary increase or unexpected expense—regular contributions allow you to adjust without having to rethink your whole retirement plan.

Small Steps, Big Results
Making regular contributions to your IRA is one of the smartest steps you can take for your retirement. It helps you harness compound interest, benefit from tax advantages, avoid last-minute stress, and stay on track with your financial goals. Plus, it turns saving into a habit, helping you build a more secure financial future one step at a time.

Jeff Long | Sales Director