Why should you save for retirement?
With uncertainties over the future of social security, longer life expectancies, and less reliance on pensions, personal savings will be an increasing factor in how well you are able to live in retirement. In fact, it is estimated that you may need at least 85% of your pre-retirement income just to maintain your pre-retirement lifestyle.1
How an IRA can help
An IRA allows your money to compound over time, and tax-deferred earnings allow your money to potentially compound at an even faster rate than non-tax-advantaged savings vehicles.
This chart shows how three people—all under age 50—end up with substantially different retirement savings. Gary invests $2,000 per year in his IRA. Bill makes a $3,000 contribution per year. And Diane makes the maximum contribution every year, which is $5,000 for 2008. Thus, investing the maximum could add thousands of dollars to an IRA over a 30-year period.
Get started with a TIAA-CREF IRA
1 This chart assumes a hypothetical interest rate of 6% with no withdrawals during the period indicated. This calculation does not reflect the deduction of any fees or expenses and is not intended to predict or project investment rate. If expenses were included, the performance would be lower. Actual returns will vary.
2 For those under age 50, the maximum contribution limit is $5,000 for 2008. In 2009 and thereafter, contribution limits will be subject to cost-of-living adjustments based on prevailing inflation rates. Based on an assumed hypothetical inflation rate of 3%, this chart assumes that the maximum contribution is $5,000 for 2008 to 2011; $5,500 for 2012 to 2014; $6,000 for 2015 and 2016; $6,500 for 2017 to 2019; $7,000 for 2020 and 2021; $7,500 for 2022 and 2023; $8,000 for 2024 and all subsequent years. These maximum contributions are based upon current tax laws and are subject to change.
© 2008 and prior years, Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF), New York, NY 10017
