How to Start Saving for Retirement
Retirement investing is a topic that some do not want to discuss. While they look forward to retirement, they are worried about having enough money when the time comes. Here is what you need to know about retirement investing to help you on your way.
Where to Begin
You need to have a concept of where to start. When it comes to retirement investing, many people are intimidated because they feel that they do not know what to do. The best thing to do at first is to take time to educate yourself and learn of the different options. Once you take the mystery out of retirement investing, it can even be something that is simple. Accordingly, familiarizing yourself with retirement accounts and terms and learning a little about investing is the best starting point.
Your Retirement Goals at Work
Retirement saving begins with a goal. Each person needs their own retirement number that quantifies the money that they need to save before the date that they stop working. With that in mind, you would work backwards to figure out how you get there during your working career. The way that you get there is by figuring out how much you need and working backwards from there.
For example, you may decide that you want to retire at 63 and need $1.5 million to retire at that age. You would then plug in a rate of return for your investments and learn how much you need to contribute so your money can compound and grow to your goal number.
How to Save
The best way to save for retirement is through slow and steady contributions from each month. While you should still manage your retirement investments, setting aside a certain percent each month and making it automatic will help you take some stress out of retirement investment.
How an IRA Helps You
With an IRA, you can also make contributions as you have the money. You then are able to decide whether you want to contribute to a traditional IRA or a Roth IRA. This determines when you will pay taxes on the money that you contribute. You can even have the money taken out of your paycheck each period if you want. With these accounts, the flexibility is yours.
According to the experts at SoFI, an individual retirement account is the best way to obtain both tax advantages and the ability to manage your retirement assets. You can invest in these accounts with either pre or post-tax dollars. The best thing about these types of accounts is that you have a wide variety of investments available to you. IRAs give you the freedom to choose as opposed to being stuck with a limited number of funds that a plan offers.
The most important part of retirement is getting started and taking the fear out of your own planning. Opening an IRA allows you to take those steps and gives you the tax-advantaged vehicle that you need for retirement saving.