If you are age 50 or older, there's still time (until April 17, 2007) to make special "catch-up" contributions of up to $1,000 to their IRAs for 2006. Catch-up contributions can be made in addition to regular IRA contributions. For example, the annual IRA contribution limit for 2006 (and 2007) is $4,000, but an individual age 50 or older can instead contribute up to $5,000 to his or her IRA.
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Catch-up contributions can have a significant impact on IRA retirement savings, as illustrated by the graph below. The example assumes a 6% rate of return, maximum catch-up contributions of $1,000 at the end of every year, maximum regular IRA contributions at the end of every year ($4,000 in 2006 and 2007, $5,000 in 2008 and beyond1), tax-deferred growth, and an investment horizon of 20 years.
This is a hypothetical example and is not intended to reflect the actual performance of any specific investment, nor is it an estimate or guarantee of future value. Investment fees and expenses have not been deducted. If they had been, the results would have been lower. When making an investment decision, investors should consider their personal investment horizons and income tax brackets, both current and anticipated.