Retirement Savings

Retirement savings is perhaps one of the most important investments you will make in your lifetime. Many retirees today are surprised to find that their money will not last as long as they thought they would. This is due to the increased cost of living and the longevity of life that many people are enjoying today. If you have not looked at your retirement portfolio in a while, you might want to take some time to meet with an investment advisor today to see how well your savings will meet your needs when you retire.

Planning for Retirement

Whether you are a student in the middle of your college education, or a new couple planning parenthood, it is never too early to begin retirement savings. There are a number of retirement plans that are available today for individuals to take advantage of. Before you do so, you need to have a solid plan that will tell you how much to invest, and where. A solid plan begins with your age and the year you plan to retire. A quick calculation of these two items will tell you approximately how many years you have to save, and thus will provide you a good idea of what kind of investments to make.

Your next step in developing a retirement savings plan is to have an idea of the expenditures you will have upon retirement. If you are young, you may not know what these will be, while an older person will have a slightly better idea. Do you own a home? Will it be paid off before you retire? Are you planning on buying a home after retirement? Do you have other goals such as seeing the world, or buying a motor home? All of these are questions that need to be answered as you develop your retirement savings plans.

If you make a list of your long and short-term goals and then meet with a financial advisor, you can begin to develop a plan to meet those goals. Of course, one of the long-term goals will be to have a retirement savings plan that will provide you with financial security long after you retire. A financial advisor is one of the best resources to help with any financial need including retirement savings. They can provide you with advice that comes from years of training and experience. Anyone who is developing a financial plan of any kind would be wise to take advantage of the experience offered by a financial advisor.

Understanding Retirement Plans

If you have just entered into the workforce and you have an employer who is offering a 401k plan, jump on it. A 401k plan is one of the best employer sponsored options available today. The employee contributes pre-tax money from their wages into an investment and savings account, and then chooses from a variety of investments in which to invest. Some employers will even offer a matching contribution into the employee's account. If the employer provides this, the employee is wise to invest at least the amount their employer will match to earn even more savings. It's almost like getting a raise!

Once the employee retires, they can start withdrawing money from their 401k plan. The taxes that were deferred when the employee was investing must be paid upon withdrawal. If the employee chooses to withdraw the money prior to retirement age, there are severe penalties associated with the withdrawals. Instead, if you leave the company before you retire, you may want to roll the money over into an IRA plan, which will eliminate the penalties you will otherwise incur.

There are two types of IRA plans available for the average individual. The first one is the Traditional IRA plan which allows individuals to contribute funds to an investment account and earn dividends on the account which can be withdrawn upon retirement. The second is the Roth IRA plan which is similar to the Traditional IRA but has different tax implications.

Both the Traditional and Roth IRA plans are excellent retirement savings plans. Each one has its advantages and disadvantages depending on the investor's age, their savings needs, and their tax bracket. Talk to a financial advisor to determine which one is the best savings plan for your needs.

Retirement savings are a critical need for everyone who plans to retire. If you start planning early and continue to increase your investments as you age, you will likely build a large savings that will last as long as you do. Talk to a financial advisor to determine which plans are the right ones for you, and be sure to contribute to them faithfully. If you follow these suggestions, you will build enough retirement savings to last you through your golden years.

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