It can be difficult to care about retirement.
Delayed gratification isn’t much fun when you’re in the delay part of it.
Up until now the term retirement has been construed as a time when you stop working and start sitting on your porch while yelling at children who wander into your yard. More and more, however, it has taken on the new meaning of a time when you can do… anything you want.
If that doesn’t get you to care about saving for retirement, go ahead and keep working until you’re dead.
If you’d like to learn your options for thriving, then read on.
Investments are key to growing your savings.
Even if you sock $400 away every month of your working career, you still aren’t going to have enough for a long comfy retirement if you don’t set it up to grow.
There are several vehicles where you can place your investments where they can grow even bigger and faster, tax free or tax deferred.
Here’s a quick summary of a few common retirement account options.
Social Security participation is not optional, but it is a large source of retirement income for many people, so it’s worth a look.
- The maximum Social Security benefit in 2014 is $2,642/month, and that’s if you made the maximum taxable earnings amount for your entire career. The 2015 maximum taxable earnings amount is $118,500.
- Changes to Social Security benefits are inevitable and therefore unreliable, particularly for younger generations, to count on for retirement income.
- A 401(k) may be provided through your employer and has the benefit of being tax deferred.
- Automatic contributions come out of your paycheck before you pay taxes, which means you are able to invest more that will eventually grow more.
- You eventually pay taxes when you make withdrawals.
- Many employers offer to match your contributions up to a percentage of pay as part of your compensation package. It is
stupidsilly not to make contributions at least up to the percentage that your employer will match. It’s literally free money.
- Contributions are currently limited to $18,000 per year.
Traditional Individual Retirement Accounts (IRA)
- If for some reason, you can’t/don’t want to go through your employer, you can open your own IRA.
- Contributions are tax deferred (just like traditional 401(k)s).
- You can set up automatic contributions.
- Contributions are limited to $5,500 for people below age 50.
Roth IRAs and 401(k)s
- Roth accounts are special because you pay taxes on the money you contribute and then never again.
- The tax savings can be SIGNIFICANT especially for younger generations, as their investments have more time to grow.
- Roths are the best thing since sliced bread and chocolate.
Thrift Savings Plan (Military Members Only)
- Currently the US government does not match retirement contributions made by service members.
- There are both Traditional and Roth options within the TSP.
Obviously there’s a lot to consider when choosing your retirement investment vehicle. If you still have questions, drop us a line at email@example.com.