I stumbled across this video today and thought I would share it with my readers. It goes over the basic ways to save for retirement. I know a lot of people haven’t even begun to save so for you, this is a real good source of information. If you have been saving for years and pretty much know what you are doing, you may want to skip this post.
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I’ll outline what the video went over that way my rss readers and those who just don’t want to re-watch it can still get the info.
1) Start Early : Maybe this should be changed to ‘Start Now’. The best thing you can do to get ahead for retirement is to start early. Even if all you can save is $20 bucks a week, in the long run it will add up very quickly.
Example: If you did save $20 per week, starting when you are 18 and kept doing that until retirement at 65, you would have $271,429 by retirement assuming a 9% return on investment. That’s probably not enough to retire off of, but it is a great start and hopefully you would be able to contribute more than $20 once you are older and making more money.
2) Capture the match: Most companies will match part of your contributions. The idea is to contribute enough to get the full matching benefit of your company. Otherwise you would be throwing away free money. They are willing to give you money if you save for retirement, why wouldn’t you want to do that?
3) The 15% solution: This “solution” is the so called rule of thumb for retirement. Generally speaking, if you save 15% of your annual income a year, you should have enough to live off of comfortably. This 15% includes any money that your company matches for your 401k. Remember you get a tax break as well for contributing to your 401k so its not nearly as much of your money as you might think.
4) Diversify with a Roth IRA: The great thing about Roth IRAs is that when you take money out of them come retirement time, you pay no taxes on withdrawls. This can be used to help manipulate your retirement income during retirement to help keep your taxes low. You should only contribute to this after you have gotten your full company 401k match.
5) Play catch up: This is for my readers in their 50s. You are allowed to contribute and extra $5,000 to your 401k and an additional $1,000 to your IRA. Try to take advantage of this if you can, especially if you didn’t start early like you probably should have.