When you hear the word retirement, chances are you think, "I have plenty of time to prepare" and the thought leaves your mind. However, that is not the case. If you plan now rather then later you can really enjoy retirement.
Check out the image below. The younger you start to prepare the more money you will have in the long run. Ben started to save at 19, putting away $2,000 for 7 years. While Arthur waited and started to save at 27 years he saved for 38 years and still had less money than Ben.
What are your options?
There are a few options out there when it comes to retirement. Some of the more popular options are IRA's. An IRA is an Individual Retirement Account. There are two forms, Tradition and Roth. Both are great accounts and offer different things.
Who can contribute?
Traditional: Anyone who is under 70 1/2 and has income from compensation is able to contribute.
Roth: You are eligible if you earn compensation and your Modified Adjusted Gross Income is less than the defined limited set by The Current Internal Revenue Code
How much can I contribute?
Tradition: You may contribute UP TO $5,500 in 2013.
Roth: You can contribute UP TO $5,500 in 2013
*This does change every year. and it different if you are over 50*
What are the tax advantages?
Traditional: Earning will acquire tax and are tax deferred until the money is withdrawn.
Roth: Earnings are taxed before they go into the Roth account. Withdrawal is tax-free and penalty-free when you have the account open for a minimum of five years and age 59 1/2 or older.
**There are exceptions with IRA's so be sure to check with a financial advisor when working with these accounts to see which fit you best**
So what is your next step?
Talk to a financial advisor.
They can work with you and your income to find the best way for you to save now and enjoy later. There is a lot of information out there but that shouldn't scare you off.
Until Next Time-- Spend Wisely and start saving for the future.
Young & Free Michigan Team