Retirement plans when your job has no programs
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- These are the documents and insurances you need to protect your family financially
Personal Finances articles and tips to improve your life. - Retirement information
Unless you have a plan retirement can seem scary or unsettling. This article gives information on making a great retirement plan.
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My work does not provide any kind of retirement planning, and I know social security is going to be insufficient to live on. I pretty much live pay check to pay check, so what can I do to prepare for my future?
Although pensions and 401(k)s do have a lot of perks, employment retirement benefits are not the only way to build a post-career future for yourself. Here are a few pointers for planning your own retirement:
1. Possibly the best vehicle for saving money for retirement besides work-offered programs is an IRA (Individual Retirement Account). An IRA is a certain type of savings account that has several benefits geared specifically toward someone who is looking to save for their golden years. And you don't need to go through an employer to set up an IRA account. There is no minimum monthly or yearly contribution required for an IRA. It also typically has a fairly high interest rate. The downside of this option is that you will be heavily penalized for removing any money before you are 59½, but since you probably are not planning to retire before then, that shouldn't really be much of drawback. And for contributions to a traditional IRA, you don't have to pay taxes until you pull them out to use them. The other kind, a Roth IRA, requires you to pay taxes before you contribute to your account, but then doesn't require you to do so when you withdraw it. So you may want to assess what tax bracket you are in now vs. the bracket you plan to be in by the time you retire before you choose your IRA type.
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2. It is very important that you start saving NOW. One of the most useful aspects of a retirement account is that the more time it sits there, the more its interest compounds. Interest is added to the account every year, and if it is left there, then interest from that interest will be added to the account on top of what is added to the principle balance. So the most important thing you can do is also the simplest, because if you start contributing to your retirement account today, whatever you put in there will instantly start to grow. Even if you only have twenty or thirty dollars extra a month to contribute, it is important that you are at least starting with something as soon as possible.
3. Follow the 10% rule. Most financial consultants say that you should be contributing at least 10% of your income every month to your retirement fund. And as long as you aren't barely making ends meet already, this is a small enough amount that it shouldn't affect your daily life too much.
4. Take the monthly contributions somewhat out of your own hands. Everybody knows how hard saving can be, even after you've made a serious commitment to do so. So in order to avoid temptation, set up an automatic withdrawal from your checking account. That way, the contributions just become an almost involuntary function that you don't even think about anymore.
