Who wants to retire poor or wanting? Everyone wants to be comfortable in the twilight years. That is when you cannot do what you please and even if ‘the spirit is willing the flesh will be too weak to earn a living’. The only alternative is to plan early in life and ensure a secure future. You have a right to live your life the way you want, especially when you get old and still want to be independent financially if not in other ways as well. The key lies in early planning and, of course, choosing the correct plan.
Even if you couldn’t start early it is not too late even now. Saving, at any time in life is one good thing anyone can and should adopt. After all, not everyone can retire to a life of Golf and laid back parties. That is for a privileged few. The majority of the people need to be able to sustain themselves in the latter part of their lives. Don’t be scared into thinking that planning for retirement is not for people like you. Even the smallest plan will help when you need money most. Think of the money you will be spending for healthcare besides food and accommodation.
To start with seek the help and guidance of a professional who knows the business thoroughly. There is no need to feel overwhelmed or intimidated by thinking that you will be subject to high pressure selling and end up with something you did not bargain for. The professional will only guide you on what is best for you from the return point of view and the tax liability as well. You will probably be asked some basic questions like your age, current earnings, savings – if any, and whatever plan you are currently subscribed to.
Choose a good 401(k) plan and check if your current employer is willing to make a matching contribution. Most employers today are open to such schemes and willingly contribute part of the profits in such plans. Remember there is a lot of tax savings in such plans. The earnings accrue in your account on a tax-deferred plan. There is normally a cap stipulated by the IRS which allows only a percentage of the salary that can go towards contributions to such plans. The money can be withdrawn upon retirement or after a fixed period as stipulated in the plan.
If you are an individual who is eligible for Traditional IRA and Roth IRA you need make up your mind which one you would like to choose. The contribution limits for both are the same. You can contribute a fixed amount and an additional catch-up contribution if you cross 50 by the end of the tax year. While contributions to Traditional IRA are eligible for tax breaks, the contributions made to Roth IRA are not eligible for such breaks.
The age limit for Traditional IRA is 70.5, whereas Roth IRA has no age limit. Income also plays a role, for Roth IRA there is an age limit and the contribution limit gets lowered when the income reaches certain levels. Traditional IRA is governed by RMD rules whereas Roth IRA is not subjected to any such regulations. Another major point to consider is that returns from Traditional IRA are subject to income tax, whereas with Roth IRA it is tax and penalty free. Consider wisely before investing, however investing for a secure tomorrow is important.
This guest post is brought to you by Chad Bauer of timewarnercable.wedocable.com, a site that offers savings and current information on time warner internet speed.
I'm Louida from Atlanta, Georgia and I'm a mother of two daughters, blogger, and full time working mom at a Business Consulting Firm.
I love helping others learn how to start working from home on the internet free to supplement their current income.
I also blog at Productreviewmom.com
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