If you are thinking about your future one thing you should think about is how you will afford your lifestyle. To help ensure that you have enough money to do what you want, as well as to support yourself, you need to start now planning for your retirement. To help you get started, below are two types of retirement plans you can choose from. You can then get everything set up so you will not have to stress about the future ahead.
1. Individual Retirement Account
One option you have is an individual retirement account (IRA). This type of an account is tax-deferred. This means you can contribute money to the account and will not have to pay taxes on the money until you start withdrawing money from the account. The one drawback to an IRA is if you withdraw the money before your retirement age you will have to pay a penalty. How much this is depends on the state that you live in.
You can use the money in the IRA to do things like invest in the money market, mutual funds, bonds, and stocks. This will allow you to make much more money for your retirement. The money you make from any of these things will go straight into your IRA account, which will then build up while you are working until you retire.
2. 401K Plan
The company you work for may have a 401K plan set up for their employees. If so, you can contribute money out of each of your paychecks. In many cases, employees match the amount their employees pay or even pay more than the exact amount. For example, the employer may double the amount of money their employees pay. This does depend on the employer that you work for. You can speak with someone in your company about this information.
One major benefit of a 401K plan is the money you put in is pre-tax. Also, this lowers the amount of taxes you pay on the money. For example, if you earn $60,000 per year and contribute $5,000 to your 401K plan, then you will only have to pay taxes on $55,000. This can save you a lot of money, especially if you consider how many years you will be paying on the 401K plan.
As with the IRA, you will have to pay penalties if you withdraw the money from your 401K before a certain age, which is currently 59 1/2, you will have to pay taxes on the money. You may also have to pay extra penalty fees. Talk with a company that offers retirement planning services to help you decide what would work for you best. They can also go over other types of retirement plans you can choose from.
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