The Basics of Retirement Saving

The best retirement saving plan will differ depending on your income, your post retirement goals, and your current financial situation. For many people, a good guideline is to plan for approximately thirty years of retirement at seventy percent of their current income. Although this is a good general guideline, you may adjust these numbers depending on what you think your life expectancy may be and how much you want to do while retired.

For instance, if you plan to sell your home and live in a trailer or live with your children, you will need less money than if you want to maintain your home and travel.


Different Ways to Approach retirement saving

There are many ways to save money. Some of the most common ways are through savings bonds and savings accounts. These options are very safe but they offer low interest and no incentives. Thus, although they are a good way to save for a rainy day, they are not great options for a retirement fund account. Alternative options for retirement saving includes accounts like IRA’s   which are Individual Retirement Accounts and 401K’s which are employee sponsored retirement saving accounts.



The benefits of Investing in IRA’s and 401K’s

When you invest in either a 401K or an IRA, you may invest up to several thousands dollars per year. The amount changes yearly so check with the IRS for any given year’s limits. The amount invested is subtracted from your pre tax income. That means that not only do you not pay tax on the invested sums, the amount of your effective income is also lowered. Thus, you may be bumped into a lower tax bracket and have a lower tax burden over all.

When you invest in either account, you can choose the degree of risk for your investment. The younger you are, the more risk you can afford to take. Larger risk also means increased potential for making more money on your investment. In many cases, employers will match some or all of your contribution to your retirement saving 401K, which means that your investment is yielding up to 100 percent interest before it even, gets invested.

The choice between an IRA or a 401K is often dependent upon whether you work for an employer or are self-employed. In addition to those options, you may need to decide between a traditional IRA and a Roth IRA. You also should not forget about traditional modes of savings such as buying a home.

The idea behind that is that you invest your mortgage payment for thirty years so that at the end of the mortgage, you have a place to live with no monthly payment due. As long as you diversify your investments and insure that your goals are realistic, you can enjoy your retirement handily.


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