When it comes to saving for retirement, there are two large groups of people: people who think they have plenty of time and don’t have to start saving yet; and people who believe it’s too late to save for their retirement.
The truth is that it’s never too early or too late. You have the time now. Why not start saving? Here are a few ways you can start saving today.
Sign Up for a 401(k) Plan
One of the best ways to save for retirement now is to sign up for a 401(k) plan. These are retirement accounts offered by most employers where the savings and accrued interest is tax-deductible. Plus, the savings are deposited for you, so you don’t have to worry about remembering to make deposits. In some cases, your employer will match contribute to the account as an incentive for you to participate.
After you hit age 59.5, you can start withdrawing from your account without penalties. Want to retire along the coast and enjoy luxurious retirement homes in Orange County? You can do so by saving with your 401(k) plan.
Not sure if a 401(K) plan is for you? Read about how 401(k) plans work.
Stash Some Cash in a New Account
A 401(k) plan isn’t available to everyone. For instance, if you’re self-employed, you don’t have an employer to offer this benefit. In this case, you can start saving on your own.
Have a few extra minutes on your lunch hour? Head over to the bank and open up a new savings account. Put some cash into it right away, and then create a plan for how much you’ll contribute each month. Consider saving a percentage of your income–such as 10 percent of each pay check–rather than a fixed amount of money. The advantage to savings accounts is that they accrue interest, which means by the time you retire, you’ll have more money in your account than what you put into it.
The type of account you choose to open depends on a number of factors, such as where you are in your life, how much money you have to invest, and your personal preferences. Talk with your bank about the different options to decide what type of account is ideal for you. If you opt for a retirement account, you can get a tax break on that money.
Open an Individual Retirement Account
Don’t have the option to contribute to a 401(k) plan but would like something better than a regular savings account? Open an Individual Retirement Account (IRA) instead. With an IRA, you can contribute up to $5,500 per year even if you’re 50 or older, and the accounts offer a tax benefit.
You can choose to open a traditional IRA or a Roth IRA. Your choice will affect your taxes and how you can withdraw your money. The accounts are different from 401(k) plans and savings accounts because you contribute to the account with money you’ve already paid taxes on, but once it’s in the account, it can grow tax-free. Once you retire and begin withdrawing the cash, you don’t have to pay any taxes on it, which means every penny goes straight to you.
Invest in Stocks
Perhaps opening a retirement account doesn’t appeal to you. Instead, you can invest your money in the stock market and cash out when you’re ready to retire. The great thing about stocks is that they have the potential to deliver higher returns than other types of investment or savings options. CNN.com says that “Since 1926, large stocks have returned an average of 9.8% per year.”
What’s more, the stock market outperforms any other investment option in the U.S., reports NBC News, so if you’re looking for the best return on your retirement fund, this is perhaps the best option. Not sure where to start? Read about how to invest in stock for retirement.
Think it’s too early or too late to start saving for retirement? No way! Start now with one or more of these mentioned savings options.
