You may have heard that IRAs are a super important part of anyone's personal financial plan. But why?
Two words: tax savings.
While IRAs do have more restrictions around things like withdrawals than regular brokerage accounts, they generally allow you to reduce the amount of taxes you owe on your investments, which means more money in your pocket at retirement.
This is very important, as tax-advantage investing could help you increase your retirement account's value by more than 15% by the time you retire.
If that sounds like chump change, consider this - for someone who starts soon after college and makes the $6,000 maximum contribution every year through retirement, that extra 15% could mean over $300,000 in additional portfolio value. That could be a second home, a child's college education, and then some.
Results are illustrative. Chart assumes $6,000 annual contribution/investment, 10% compound annual growth rate (CAGR), 25% income tax rate, and 15% capital gains tax rate.