April 22, 2022
Mr. Franklin is right (and maybe that’s why he’s on the $100 bill!)
Retirement may seem like it’s an entire lifetime away, especially if you’re just beginning your career, but saving for retirement cannot start early enough. For many, retirement is the single largest savings goal that you will ever work towards. That may seem like a daunting task, but just like with any other goal, the first step is to just get started.
In this case, getting started could mean setting yourself up with an IRA or a 401(k).
An IRA is a savings account with tax advantages that individuals can open to save and invest in the long term.
- IRAs are retirement savings accounts with tax advantages.
- Types include: traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs.
- You can’t usually withdraw any of the money without a tax penalty until you are 59½.
- There are annual income limitations for deducting contributions to traditional IRAs and for contributing to Roth IRAs.
- IRAs are meant to be long-term retirement savings accounts. If you take money out early, you defeat that purpose by diminishing your retirement assets.
- A 401(k) is a qualified retirement plan, which means it is eligible for special tax benefits.
- You can invest a portion of your salary, up to an annual limit.
- Your employer may or may not match some part of your contribution.
- The money will be invested for your retirement, usually in your choice of a variety of mutual funds.
- You can’t usually withdraw any of the money without a tax penalty until you are 59½.