It’s never too early to start planning for retirement
- Take advantage of employer-sponsored retirement plans. If you have access to a 401(k) or similar plan through your employer, contribute as much as they allow. If your employer offers a matching contribution, this essentially doubles your savings! (Note: You’ll need to pay taxes on these contributions in the year that they are made.)
- Consider opening an IRA (Individual Retirement Account). IRAs can be funded with both pre-tax and after-tax dollars, so consider whether it makes sense to fund one using after-tax dollars if you’re aiming for tax diversification in your portfolio. To learn more about IRAs, check out our complete guide here .
You won’t be able to live off Social Security.
Social Security is a safety net, not a retirement plan.
While it’s true that Social Security will pay you a benefit in your old age, the amount of money you get from Social Security is not enough to live off of. In fact, depending on how much money you make and how long you live, Social Security may not even be enough to cover your basic living expenses and health care costs.
As such, while Social Security is certainly an important part of your financial plan—and you should take advantage of it if possible—it shouldn’t be looked at as the primary source of income for those planning their golden years.
If you don’t have a 401(k) or employer-sponsored plan, you can still save.
If you don’t have a 401(k) or employer-sponsored plan, you can still save.
You may want to consider opening an individual retirement account (IRA) so that you can save for retirement on your own. The most common types of IRAs are:
- Traditional IRAs
- Roth IRAs
- SEP IRAs (a type of retirement plan) and SIMPLE IRAs are also available to small businesses. If you’re self-employed, another option is the Solo 401(k), which lets you put away money into a tax-deferred account for yourself and for any business partners who work for your company at least half time.
There are many types of retirement plans available.
There are many types of retirement plans available. A traditional IRA, for example, is an account that you contribute to every year with post-tax dollars (meaning after you have paid taxes on your income). The money grows tax deferred and when it’s time to withdraw the funds in retirement they will be taxable. There are also Roth IRAs which work similarly but are funded with post-tax dollars as well but the contributions can be withdrawn tax-free during retirement.
A 401(k) plan is another type of retirement plan that is offered by employers; this option works like a traditional IRA except it has better investment options than most IRAs and allows for employer matching contributions if your company offers them.
There are also Simple IRAs available through banks or online financial institutions that allow you start saving money through automatic deductions from paychecks which will then go into an account where it can grow until needed later on in life.
Retirement savings plans are tax-advantaged.
- Tax-deferred growth: Contributions to a retirement account are not taxed while they stay in the account. When you withdraw money from your IRA or 401(k) in retirement, it will be taxed as ordinary income at that time.
- Tax-free withdrawals: You can withdraw money from a traditional IRA at any time without paying taxes on it if you’re over 59 1/2 years old and have had the account open for five years or longer (since 2007). If you take a distribution from a Roth IRA before age 59 1/2, you’ll owe taxes on the amount withdrawn but no penalties. And if you transfer funds from one type of qualified plan to another (such as moving your 401(k) balance into an IRA), there won’t be any tax consequences either; this is called a “rollover.”
Even if you’ve just started your job, it’s not too late to start saving for retirement.
Even if you have just started your first job, it’s never too late to start saving for retirement. To get started, you can contribute to an employer-sponsored retirement plan like a 401(k) or 403(b), which will allow your contributions (and any employer matching funds) to grow tax-free until withdrawal. Even if employers don’t offer a retirement plan through work, they may offer one where they work as well. If that’s not the case and you still want some sort of employer-sponsored retirement account outside of Social Security, open an IRA with a brokerage firm or fund company such as Vanguard or Fidelity and invest within their respective offerings there!
Most importantly: even if all this seems overwhelming right now—don’t worry! Take things step by step and stay focused on what matters most at this moment in time: investing in yourself!
Saving for your retirement as soon as possible is essential if you want to enjoy life after leaving the workforce.
Saving for your retirement as soon as possible is essential if you want to enjoy life after leaving the workforce.
While there are many things in life that we can’t control, saving for retirement is one area where we have full control over our destiny. The earlier you start saving, the more time your money has to grow and compound over time. The longer you wait to save, the more money you’ll need on hand when it’s time to retire (and the less likely it will be available).
If you start early and continue contributing throughout your career, then at age 65 or so—the traditional retirement age—you could potentially have saved up enough money for a comfortable lifestyle during those post-work years. On the other hand, if waiting until later in life before starting a savings plan means that now at age 45 or 50 there isn’t nearly enough cash in those accounts yet because of poor investment choices made earlier on in life: what was once good fortune has become misfortune because of bad planning decisions made decades ago!
