Retirement Planning: Start Now!

IRA rock, IRA stoneRetirement may seem like it’s a long way off, but it will come faster than you think.  And if you’re not ready for it, if you haven’t been saving, you’re going to find that your standard of living changes dramatically when you stop working.  You may think that just because you’re young you don’t have to worry about it yet.  There will be plenty of time to plan for your twilight years later on.  But by starting now, you have the opportunity to exponentially increase the amount of money you have by the time you reach the age of retirement.  Here are a few ways you can get started to ensure that you’re taken care of when the time comes.

The first and easiest retirement plan is the 401K provided by the company you work for.

Most businesses these days offer a plan by which they withdraw a percentage of your earnings from each check (pre-tax) and put it into an account that is managed by an investment firm.  The money then continues to earn until you retire, at which point you can begin drawing it as an income.  Some companies even have matching programs by which they will contribute money to your 401K correspondingly with your contribution (generally in the neighborhood of 5% of your earnings).  It really pays to take this free money if it’s available.  Just remember that you can’t touch this money pre-retirement without penalty.

You can also start a Roth IRA which is another type of investment account that also matures when you reach retirement age.

It tends to be fairly safe and earn a higher percentage annually than other types of accounts.  Although you can only put a certain amount of money into your IRA each year, it counts as pre-tax money (you can claim it on your taxes as a deductible).  This means you have more money earning for you.  And considering that most of us won’t be able to take advantage of social security by the time we retire (despite the fact that we’re paying in now) it couldn’t hurt to have a backup plan.

Finally, you can look into other kinds of investments, such as stocks and bonds.

Building up a portfolio could substantially increase your income once you retire.  Although you will have to pay taxes on anything you earn annually, you won’t be paying income tax later on (like you will when you withdraw from your retirement accounts).  When it comes to your portfolio, just be sure to diversify.  A variety of investments will ensure that if one area goes belly up, you haven’t lost all of your money.  And while it’s probably pretty useful to engage the services of a stock broker (for invaluable advice and opportunities) you can opt to do it on your own with a service like E-Trade.

By starting early and spreading your money around to a variety of accounts and investments, you can ensure that you are taken care of when you reach the age of retirement.  While you can certainly wait and hope for the best, thinking you have plenty of time, you may find that when the time comes to start withdrawing, you simply don’t have enough to keep you afloat without the added income from a job.

Paul Abikasis is a writer for Roth IRA where you can find out information about Roth IRA conversion and learn  how to open a Roth IRA as well as finding other tools and information to help you on the road to retirement.

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