Win the lottery. Just kidding! We all want to retire without having to worry about running out of money. With social security unreliable at best and inflation running rampant, many of us don’t even know how much to save in order to retire well. In this post you’ll find some ways to make sure you have enough money as you enter your golden years.
Three-Steps to Better Retirement Savings Program
Saving money in a retirement savings program, whether you are getting it through work or have opened it yourself, is a great thing to do. You do not want to have to keep working after retirement just because you don’t have enough money to cover your expenses. You’ll want to be aware of what type you plan is and how your retirement plan works. Here are three steps to make sure you are getting the most from your plan.
1. Set a goal. This is a hard step when you are planning for your retirement because of the many factors you have to think about; you can, however, go online and use one of the many retirement calculators that are available to get a general estimate of what you will need.
2. Decide how much you need to save. You can break this up by how much to save per year, and then down to the month or even as far down as how much per week. Figure that into your monthly budget and treat it like a bill so that you have to save it and not use it for something else.
3. Choose your investments. This is an important and complicated step. You will need to do research and maybe even get some advice from a financial adviser. Once these three steps are complete you can sit back and know that you will be prepared for your retirement future.
Why You Need a Roth IRA — Now!
A Roth IRA is a great way to save for retirement. This account, if you follow the rules and put your money away properly, is totally tax-free. As of 2008 you are allowed to dump $5,000 annually into a Roth IRA account. As long as you wait until retirement to take the money out of the account then you will have not have to give the IRS one cent of this money.
There are a few rules associated with Roth IRA accounts. The first is that you must earn the income you contribute to it. This money cannot be a gift or left over money from another loan. It must be something you received through employment and you cannot save more then you made. Additionally, you also must stop contributing if you make more then $95,000 is you are single or $150,000 if you are married. As long as you remain under that limit you can put away up to $5,000 per year.
Think about it, if you start contributing to your Roth IRA at the age of twenty-five, while you’re still making below the income cap, then you can continue adding money and end up with nice chunk of change by the time you retire!
Understanding 403b Retirement Plans
One type of retirement plan to look at is the 403b retirement plan. Not all people are eligible for this plan, only those of certain professions including doctors, teachers, researchers, librarians, school administrators, nurses, professors, school personnel and ministers.
These are all individuals who are employees of tax-free organizations and if you are an employee of a tax free organization, it is imperative to looker deeper into this plan if you have not already. This retirement plan is a tax postponed plan and is a government-encouraged program. This means there are usually conditions to enroll contrary to most retirement plans, so you will need to speak with your employer for more information.
To have a savings plan like this you must agree to invest at least two hundred dollars a year. This really isn’t that much, especially if you are looking to actually gain savings for retirement. The maximum amount you can save per year is 20% of your total income. You will not be eligible for a plan like this if you are a student, in another tax deferred savings plan or are working less than twenty hours a week.
It is imperative that you follow all of the rules of this plan. If you do not, your entire company could be held responsible for your actions. Once enrolled you will set aside money on a pre-tax foundation that is deducted from your pay by your employer. The money is then put into a financial institution that your employer chooses. The 403b plan is similar to the 401(k) in that the money accumulates tax-deferred until you retire, but if you choose to withdraw it will be taxed like regular income.
This can be an extremely beneficial plan if you use it wisely and understand what you need to do to maximize your savings for retirement, contact your financial advisor or employer for more information