SpawnPoint

Saving For Retirement

The topic of this latest article affects not just older individuals, but younger individuals such as your self. It is of great importance to start saving at an early age for your retirement, as Social Security (which you pay into automatically) no longer provides for a comfortable retirement as generations pass.

There are several different methods one can use to save for retirement. You can start your own savings account, which accrues interest on a monthly/yearly basis. Putting away a small amount of money from each paycheck throughout the duration of your lifetime, helps not only to supplement your SS retirement earnings, but can also be a tremendous boon, should you and your family run into a financial hardship or emergency. It is very important to not touch this savings for anything frivolous, and only dip into it when direly needed.

Another method of saving for retirement is a 401K plan. This is an employer sponsored contribution program that allows workers to have a portion of his/her wages paid directly into a 401K retirement account. Typically this deposits are made before taxes, and as such, are not subject to taxes until they are withdrawn. Often, an employer will contribute a percentage of your deposits as well. The percentage that the employer contributes vary from workplace to workplace. This is often considered “free money” in the work sector, as your 401k savings can build up rather quickly. One thing to note, be careful when withdrawing monies from your 401k account, they can be subject to taxes and penalties in some instances.

Yet another method of savings is called the IRA (Individual Retirement Account). This is an account in which money is invested which earns interest over time. There are two types of IRAs, Roth and Traditional. The advantage of the Traditional, is that contributions are tax deductible yearly when they are made, however, the money is taxed when it is withdrawn for retirement. Inversely, Roth IRA contributions are not tax deductible on a yearly basis, but withdrawals are tax free when the account has been opened for at least 5 years, and the owner is at least 59 ½ years old. Early account penalties also apply to IRAs as well, so care should be taken when deciding on withdrawing your money early.

There are other methods for saving for retirement, but they are much more risky. For teenagers just starting to work, newly married couples just starting life together, or the average person looking to enjoy a comfortable retirement, you should look to start saving early. It benefits all in the long run, no matter what the age group. I personally took an H&R Block Tax Course this past fall, and learned of the great advantages of saving early. With two kids, and one on the way, I don’t want to have to rely on my stepson or daughter striking it rich to help provide me with an enjoyable retirement, although it would be nice.