Employer-Sponsored Retirement Plans*
If your employer offers a retirement savings plan, contribute as much as you can. Not only do you receive tax benefits, but your company may even match savings, which is essentially like missing out on extra money if you don't contribute. The earlier you start the better, and over the lifetime of your career, the small savings will compound and accumulate to larger amounts by the time you retire. Just remember, you can't win if you don't participate.
Put Money into an Individual Retirement Account*
You can put up to $5,000 a year into an Individual Retirement Account (IRA) and you can contribute more if you are 50 or older. There are two different kinds of IRAs; traditional or Roth. Each has unique tax options, and can be set so an amount is automatically deducted from your checking or savings account and deposited into the IRA.
You can get your Social Security Statement online via ssa.gov which provides estimates of retirement and disability benefits you may receive, a list of your lifetime earnings according to Social Security records, an estimate of Social Security and Medicare taxes you've paid, and much more.
Certificates of Deposit
Certificates of Deposit (CDs) are a low risk way for investors to save cash and get interest because they are Member FDIC insured. Often times, CDs are viewed as a tool to protect wealth versus a tool to build wealth, but can be useful for retirees who ladder CDs and want steady income.
Your home is most likely the largest purchase you will make. The larger the home, the more you pay in taxes, utilities, and upkeep. During your retirement years, you can downsize and have a sizeable amount of funds while reducing your daily living expenses.
And Remember, Don't Stop or Pause Retirement Savings*
Pausing or stopping your retirement contributions can be very expensive over the long term. Even if your balance is relatively small, the impact on your retirement funds could be significant as the chart shows below. Plus using retirement money early can have an immediate and substantial penalty withdrawal and tax cost.
|The Long-Term Cost of an Early Withdrawal
|Retirement Account Balance at Age 30
|Withdrawal at Age 30
|Contributions Age 30-65
||$100 per month
||$100 per month
|Balance at Age 65*
Assumes a 7% average annual total investment return. Money will be taxed upon withdrawal. This is a hypothetical example with investment returns compounded monthly. Your investment returns and contributions will be different.
The odds of winning the $241 Million Powerball Jackpot were approximately 1 in 176 million. By doing a simple internet search, you will find the odds are better for birthing identical quadruplets, becoming the next US President, dating a supermodel, or becoming a movie star. Don't play against the odds: build a solid retirement plan that you know is a sure bet.
*Investment products are not a deposit, not FDIC insured, not insured by any federal government agency, carry no bank guarantee, and may go down in value.