It is difficult to think long-term, especially for events as far away from retirement, when you are simply trying to stay on top of all your everyday affairs. That doesn’t make it any less important, though, so take some time to learn about retirement savings accounts and savings strategies.
Retirement accounts are tax-advantaged holding accounts designed to encourage people to save for retirement, with limitations on yearly contributions. The asset allocation within the accounts within, such as stocks, bonds, or mutual funds, is based on your risk aversion.
A 401(k) is an account offered by the employer. You would make pre-tax contributions, and often your employer will match a certain percentage. Educators and non-profit employees would use a 403(b), and government employees would use a 457(b).
An individual retirement account (IRA) can receive individual contributions as well as savings originally from an employer-sponsored plan.
Other sources of retirement income included pensions, Social Security, and annuities.
While challenging, it is essential to take charge of your retirement plan and take small steps to start or boost your retirement savings. Here’s how:
Be Cautious of Early Withdrawals
While tempting, your retirement savings are intended to be there for your retirement. Early withdrawals will negatively impact your ability to retire comfortably.
As Clever Girl Finance notes, early withdrawal negatively impacts your ability to build wealth because:
Money Management E-Newsletter: February 2019