*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you’d like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.
The ultimate reward for a hardworking American’s successful career is the day that they can say, “I’m retiring.”
After all, retirement is the reward at the top of the mountain, right? Well, unless you’ve got a billionaire uncle named Bill that developed groundbreaking software or a brother named Mark that revolutionized the world’s social networking, you’ve got to plan for your own retirement.
Retiring is a rich American tradition, but unfortunately so is not preparing for your retirement. American’s routinely live in the financial moment and don’t adequately prepare for a financially healthy retirement. In fact, one CNN Money article states that 43% of American households won’t have enough money to retire when that day comes. We always think that we have tomorrow, but if you’re old enough to have a job then tomorrow starts today. Here are some plans that are crucial to your retirement, starting today.
Invest in a 401K Plan
I’m sure you’ve heard it before, but here it is one more time for the record. You need to have a well invested 401K plan. If you’re company offers a match then at minimum you need to put in a contribution that your employer matches. This is a reward for you investing in your future. If someone came up to you and said that they’d put $10 in your piggy bank each time you put $20 in your little piggy, that pig would be stuffed Hogzilla. Even if you’re company doesn’t match you should still invest in the plan. Firstly, 401K plan contributions aren’t taxable income and fewer taxes are a good thing. Secondly, depending on the distribution of your 401K plan, you may see some untaxed growth and finally it comes right out of your check so you won’t have to be disciplined and take it to bank.
Invest in an IRA
So, if your employer doesn’t offer a 401K plan or if you’re self-employed, then you’ll need to jump on the IRA train. An Individual Retirement Account (or IRA) can once again provide you with a few tax shelters (you may be picking up on the fact that avoiding taxes may be the key to savings). The big tax break on the IRA is the fact that the money in the account is sheltered while it grows. When your salary grows, you pay more taxes. When your basic savings account grows, you pay more taxes. When your IRA balance grows, you pay nothing.
Just Save Money
I don’t care if it’s in a savings account at your local bank or if you’ve got a coffee can that you hide under the house. You need to save money. This is over and above an IRA or 401K plan. Savings is the basis for financial freedom. Don’t you want to see the day when you know longer have to clock in at an office? Whether you plan to travel the world or simply get up and stare at the cars driving down the street, the objective here is to have a day when you don’t have to go to work. Say you start saving $100 per week at the age of 22. Assuming you get a 3% raise every year until you’re 60 and you increase your savings by that same 3%, you will have saved $359,629.14. Now if you calculate your earnings at base savings rate of 5% interest, you’ll increase that number by $17,981.46. Now isn’t that something to work for!
More from this Contributor:
Easy Money Management Tips for Young Adults
How to Cut Your Air Travel Costs
Beware of Payday Loan Companies