Planning for retirement is a necessary task, and it does not end once you have created a plan. Preparing for your Golden Years takes time, energy, and constant follow-up to make sure you stay on track. Life has the tendency to throw us curveballs from time to time, and those events can hinder saving for retirement. Having a roadmap to your retirement goals is one way to manage unexpected issues and still retire comfortably. Here are the top four things to put in place now for a fruitful retirement later.
1. Make Saving Automatic
Compound interest will have a significant impact on your money. The effects are not apparent at first, but over the years, the compounding interest will create a nice nest egg. The way to take advantage of it is to start saving money early on and let the interest rate do its magic. The easiest method is to have a set amount taken out of your bank account every month. Put that money directly into a retirement vehicle, and never touch it until you reach retirement age.
2. Participate in Employer Programs
Many employers offer 401(K)s. These programs offer tax benefits. The money is taken out of your paycheck before taxes are calculated. The tax you pay will be based on the new reduced amount. You are getting to shelter some of your money from Uncle Sam. You will pay taxes on the 401(k) funds you when you access them as a senior. When you are older, you may be in a lower tax bracket than while you were working. You can save money on the front and back end, and you have an official retirement account working for you.
3. Invest in an IRA
If you are self-employed, you can start your own programs, which are titled individual retirement accounts (IRA). You will get many of the same perks as people with access to 401(K)s. The funds you deposit might not be taxed, but this will depend if you are already participating in a 401(K). There are two common types of IRAs: traditional and Roth. With the regular version, the deposits are tax-deferred, and the Roth accounts will take out taxes first, then the remaining portion will go into the IRA. When you withdrawal from a Roth IRA, you are not taxed again. The IRS has many brochures on these forms of retirement setups.
4. Social Security
If you are close to retirement age, you can factor in a Social Security check, but younger generations should consider building their own system. Even if there are Social Security funds left in the future, the payments will not likely be enough to survive on, and you should plan on having an alternate source of income.
Dil Bole Oberoi
