As Financial Literacy Month comes to a close, let’s wrap up our financial literacy series with a conversation about retirement and how you can make sure your future is secure.
For some, retirement might seem very far away. If you are in your twenties or even your thirties, you might be thinking you don’t have to concern yourself with retirement just yet. Even though it seems like it’s lightyears away, it is crucial to start saving now! This is your future and the money you save now will set you up for a successful, comfortable retirement.
Once you retire, your main source of income will be the money you have saved and invested in your retirement accounts. While this may seem scary and daunting, there are many things you can do to ensure that your financial future stays bright. Here are some items you should be aware of and think about as you plan and save for retirement:
Employer Retirement Plans: Many employers offer retirement plans, such as 401(k)s or 403(b)s, that allow you to put money aside from each pay check, pre-tax! Some employers even agree to match whatever money you invest (up to a certain amount). For example, if you choose to invest 6% of your income, your employer might match up to 3%, equaling a total investment of 9% of your salary! The average rate of return ranges from 5% to 8% annually. While not all employers match your contributions, if your company does provide this benefit, you should definitely take advantage of it! It’s extra income.
IRA Accounts: If your employer does not offer a retirement plan, there is still hope! Individual Retirement Accounts (IRAs) are a type of investment account that come with tax benefits that help you save for retirement. Anyone with an income can open an IRA account. There are two main types of IRA accounts: traditional and Roth. In this post, we will focus on Roth IRAs as some argue this to be one of the best options. With a Roth account, the money you contribute is taxed up front, which means you your money grows tax free; in other words, you won’t owe anything when you take it out! There are income and annual contribution limitations which you can learn more about here but this is a great option for most lower to middle class families.
High-interest Savings Accounts: If your bank offers savings accounts with high interest percentages, these accounts can be a great option to consider as a way to assist in building your savings! As we discussed in our previous blog, interest can be very helpful in growing your finances by just putting a little bit of money aside each month and allowing the interest to accrue over time. Some banks will offer up to 1% interest rates based on your initial deposit and the total money you keep in your savings. While you will need to meet certain criteria, this can be easy money that you can earn through your bank.
Retirement may seem a long way away but that is not a reason to avoid preparation. Your lifestyle after retirement is important and how you plan for it should be taken seriously. By simply putting aside a little bit each month, you can put yourself a little bit more ease. You are in control of your financial future and can set yourself up for success every day!