The Benefits of Starting an IRA Early

25 May 2025

When it comes to financial planning, starting early often feels like an overused cliché, doesn’t it? But, let me tell you—there’s a reason why financial pros are always hammering home the idea of “starting now.” If you’ve ever thought about retirement planning, you’ve probably heard about an Individual Retirement Account (IRA). Maybe you even rolled your eyes and thought, “I’ll get to it later.” I get it—life’s busy, and retirement feels ages away.

But here’s the thing: starting an IRA early is like planting a tree. The earlier you plant it, the more time it has to grow into something massive and fruitful. And trust me, future-you will be high-fiving the current-you for being so financially savvy. In today’s post, we’re going to break down why starting an IRA early is one of the best financial moves you can make.

What Is an IRA, and Why Does It Matter?

First things first—let’s demystify the whole “IRA” thing. IRA stands for Individual Retirement Account, and it’s essentially a special savings account designed to help you sock away money for your golden years. Think of it as a retirement piggy bank, but with some really cool tax perks.

There are two main types of IRAs:

1. Traditional IRA: You contribute pre-tax money (or tax-deductible funds), which lowers your taxable income now. The catch? You’ll pay taxes later when you withdraw.
2. Roth IRA: You contribute post-tax dollars (no immediate tax deduction), but the withdrawals in retirement are completely tax-free. Yep, you heard that right—tax-free.

The gist? Both types of IRAs are fantastic tools for building a retirement nest egg. Which one you choose depends on your current financial situation and your future goals.

Time Is Your Best Friend: Compound Interest

Here’s the magic word: compound interest. It’s basically interest that earns interest over time. Imagine snowballing where a small snowball grows massive as it rolls downhill. That’s what compound interest does to your money.

Let me hit you with a quick example:

- Imagine you contribute $6,000 to an IRA every year starting at age 25. If your investments grow at an average rate of 7% annually, by the time you’re 65, you’d have around $1.4 million.
- Now, if you start at 35 instead? That total drops to $654,000.

Starting early gives your money decades to multiply—no fancy tricks, just time and patience. It’s almost hard to believe how much of a difference those 10 years can make, right?

Tax Advantages: Keep More of Your Hard-Earned Cash

Tax benefits are one of the biggest reasons people flock to IRAs. The government actually wants you to save for retirement, so they offer incentives to sweeten the pot.

- Traditional IRA: Contributions may be tax-deductible, which means you’re lowering your taxable income now. Plus, your investments grow tax-deferred (you don’t pay taxes on the gains until you withdraw).
- Roth IRA: While there’s no upfront deduction, the magic happens in retirement. All the growth and withdrawals? Completely tax-free.

Let’s be real—who doesn’t love legally sidestepping the taxman?

Flexibility to Fit Your Lifestyle

An IRA isn’t just a one-size-fits-all deal—it’s a flexible option that can work for just about anyone. Whether you’re a freelancer, a corporate go-getter, or someone taking a career break, there’s an IRA option for you.

Don’t have a 401(k) at your job? No problem. IRAs give you the freedom to build your own retirement pot without relying on an employer. They’re perfect for people who like to stay in control of their financial journey.

Fun fact: You don’t even need a ton of money to get started. Many brokerage firms let you open an IRA with as little as $0 or a small minimum deposit. Talk about low barriers to entry!

Future-Proofing Your Financial Freedom

Let’s talk future-you for a second. Retirement might seem like it’s light-years away, but it’ll sneak up on you faster than you think (kind of like how weekends disappear in a blink).

Starting your IRA early ensures that when retirement does roll around, you’ll have options. Want to travel the world? Check. Help your grandkids with college? Done. Spend your days golfing, gardening, or sipping margaritas on a beach? Absolutely.

By starting young, you’re effectively taking control of your financial future. No one wants to feel stressed about money when they’re supposed to be living their best, most relaxed life.

The Cost of Waiting: Procrastination Isn’t Free

Think procrastination only affects your to-do list? Think again. Waiting to open an IRA can cost you big time.

Here’s a simple breakdown:

- Younger Start (Age 25): Contribute $6,000 per year for 40 years = $1.4 million.
- Delaying 10 Years (Age 35): Contribute $6,000 per year for 30 years = $654,000.

That’s an $800,000 difference—just because you waited. Yikes.

The moral of the story? Start now, even if you can only contribute a small amount. Your future self will thank you.

It’s Never Too Early—or Too Late—to Start

Okay, so maybe you’re not 25 anymore, and this whole “start early” thing feels a little guilt-trippy. Don’t worry—I’m not here to make you feel bad. The truth is, it’s never too late to get started.

While starting early is ideal, the next best time to plant that metaphorical tree is today. Even if you’re in your 30s, 40s, or beyond, contributing to an IRA can still make a huge difference.

The key is to take action. Small, consistent contributions can add up over time and set you on a better path toward financial security.

Action Plan: How to Start Your IRA Today

Feeling motivated? Good! Setting up an IRA isn’t as daunting as it sounds. Here’s a quick action plan to get you moving:

1. Choose Your IRA Type: Decide between a Traditional IRA and a Roth IRA based on your current tax situation and future goals.
2. Pick a Brokerage Firm: Look for one with low fees, great customer reviews, and beginner-friendly tools. Some popular choices include Vanguard, Fidelity, and Charles Schwab.
3. Open Your Account: Most firms let you do this online in under 15 minutes. You’ll just need some basic info like your Social Security number.
4. Start Contributing: Don’t worry about maxing it out right away. Even $50 a month is a great start.
5. Invest Your Contributions: Your money doesn’t grow if it’s just sitting there—invest it! Many IRAs offer target-date funds or index funds, which are great for beginners.

Boom. Just like that, you’re officially on the retirement savings train.

Final Thoughts

Starting an IRA early is one of the smartest financial decisions you can make, hands down. It’s like giving your money a head start in a race, letting it grow and compound for decades. And with the added perks of tax benefits and flexibility, it’s almost a no-brainer.

The clock is ticking, but the good news is that it’s never too late—or too early—to start. So why not take that first step today? Your future self will be eternally grateful.