One of the most important financial plans you can make is your plan for retirement. Social Security has historically failed to provide adequate funds to retirees because of unexpected changes in the rate of inflation. While you will receive benefits if you qualify, the money probably won`t cover your living and medical expenses.
If you want to retire and live comfortably, you need to start saving for your retirement as soon as possible. Retirement plans are not one size fits all, however, so you`ll need to research your options before committing to a strategy.
A 401(k) is an easy way to start saving for retirement that is offered by many employers. Your contributions to the account are not taxed. You`ll also enjoy tax-deferred growth, as you won`t pay taxes until you start withdrawing money.
Some employers offer matching contributions to a 401(k) account for employers. Your employer may match your contributions up to a certain amount or percentage. Take advantage of employer-matched contributions to grow your account faster.read more information about managing your 401(k) Plan by clicking here
A 401(k) plan is subject to the ups and downs of the stock market. You may lose money over time. Research plan investment choices carefully. Risky investment plans may mean greater gains but also increase your chance of losses. More conservative plans usually have a lower rate of return but carry less risk.
As a rule, the closer you are to retirement age, the less risky your investments should be. If you lose a significant portion of your retirement savings while you`re still far away from your retirement age, you`ll have the time necessary to make up for the loss.
If your employer doesn`t offer 401(k) plans or you`re self-employed, you can get an IRA instead of a 401(k). An IRA is an investment account similar to a 401(k) that you set up yourself.
A traditional IRA account allows for some tax deductions on your contributions and tax-deferred savings. You will pay taxes on your withdrawals. A Roth IRA, on the other hand, doesn`t have deductions available for contributions, but you won`t have to pay taxes when you withdraw.
If you`re trying to decide between a traditional or Roth IRA, consider how much you want to contribute and what type of tax deduction that amount would net you with a traditional IRA. If you don`t want to deal with taxes on the account during your retirement, a Roth IRA is a possible option for you.
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Investment items, such as low-risk stocks, add balance to your retirement portfolio. Although many people include bonds in their retirement plans, there is a downside. Since bonds usually have a maturity life span of a decade or more, inflation may eat away at the interest payments you receive.
Before you settle on any investment item, make sure you check the prevailing rates. Financial websites, such as Simply Finance and banks often have rate information available for the public. By following the market, you can determine what type of retirement plan is best for you.