Powerful Retirement Planning Made Easy
Will You Be Ready To Retire?
There has been a lot of noise in the financial industry that social security may be in jeopardy for future generations. The way government programs are being cut to balance budget deficits, the financial industry may be right or they may be wrong; future generations may or may not have social security funds available for their retirement years.
If you are under age 40 and you thought social security would be around when you reached retirement age so you haven’t started investing, you had better get started. You are responsible for your own retirement.
Tip #1 – The Power of Compounding
Take Advantage of Compounding|Invest Early
You are never too young to start saving for your retirement. In fact, the younger you are when you start investing, the less money you will need overall. This is due to the power of compounding.
Compounding is magical; it makes the money you save today increase many times over. The earlier you start investing, the longer the period of time in which your money will be in the market growing.
If you are starting later in your career, instead of using time to your advantage, use the size of your investment. Compounding can work to your advantage if you invest larger amounts.
Tip #2 – The Power of Your 401k Plan
Take Advantage of Tax Deferral
The money you invest into your 401k plan is tax deferred; which means that you get to delay paying taxes on any money that gets invested into your 401k account. Since you are delaying taxes, all of the money you invest gets to grow. A tax deferred investment will grow faster than a taxable account.
If your employer matches your 401k investment, you are getting free money, every one could use free money. You can maximize this advantage by investing the full amount necessary to receive the full match.
Tip #3 – The Power of Your IRA
There Are Traditional IRA’s and Roth IRA’s
The money you invest into a Traditional IRA is tax deferred just like a 401k investment. So if you want to take advantage of a tax deferred investment consider investing into a Traditional IRA. There are tax rules that apply to Traditional IRA’s so be check with your accountant first before investing.
Monies invested into Roth IRA’s are not tax deferred; your investment money is after-tax monies. However, the advantage to a Roth IRA investment is that the money is not taxed when you retire. The IRS figures that at retirement you will be in a lower tax bracket so your money will be hit with lower taxes.